As 2020 came to a close, our friends in the U.S. have bestowed a few compliance “holiday gifts” upon us… so just in case you missed it, here’s what has been put under our tree:
Sanctions:
On December 28, 2020, the National Commercial Bank, a bank based in Jeddah, Saudi Arabia, settled with OFAC potential civil liability for apparent violations of Sudan- and Syria-related sanctions. A Saudi bank! The extraterritorial application of U.S. laws knows no limits by the looks of it.
According to OFAC, the bank processed 13 U.S. dollar transactions in violation of the U.S. Sanctions. The bank voluntarily self-disclosed the eight Syria-related violations but did not voluntarily self-disclose the five Sudan-related violations. OFAC determined that the violations constitute a “non-egregious” case and fined the bank a $653,347 penalty. Although the case is incredibly routine, with nothing extraordinary to declare, it just goes to prove that OFAC has a long arm indeed.
On January 4, 2021, OFAC (who was not slowed down by the holidays) announced a settlement with Union de Banques Arabes et Françaises (“UBAF”). The France-based bank facilitates trade finance between Europe and the Middle East, North Africa, sub-Saharan Africa, and Asia. UBAF was fined an eye-watering $8,572,500 to settle 127 apparent violations of Syria-related sanctions, which happened under UBAF’s management watch as per OFAC. UBAF processed the payments on behalf of sanctioned Syrian financial institutions.
In both cases, the Syria-related violations occurred shortly after the imposition of the Syria sanctions in 2011.
Export Controls:
The U.S. Department of Commerce, Bureau of Industry and Security (BIS) put together a few gifts of its own. New measures targeting countries, namely Russia and China (which now, for export purposes, officially includes Hong Kong) were announced. Because these measures are now effective, companies will need to ensure compliance with these measures, including licensing and reporting requirements.
On December 22, 2020, BIS published added 77 entities to the Entity List, whose activities were deemed contrary to U.S. national security and foreign policy interests. Export licenses are now required for the export, re-export, or in-country transfer of any item subject to the EAR to a listed entity. What’s extraordinary is the wide range of entities that ended up on the list: shipbuilding companies, universities, and research institutes, in China (including Hong Kong), Bulgaria, France, Germany, Italy, Malta, Pakistan, Russia, Israel, and the United Arab Emirates to name a few.
The very next day, BIS published a new “Military End User” (MEU) List (as discussed in this earlier post) listing the first tranche of entities deemed to be “military end-users.” BIS listed 57 Chinese entities and 45 Russian entities, along with a placeholder for parties in Venezuela. People use placeholders in their calendars, and BIS use placeholders for countries non-grata; that’s how the world works. Needless to say, an export license is required for the export, re-export, or transfer of controlled items to any of the parties on the list, but the likelihood of being granted such a license is slim.
On December 23, BIS issued a final rule directing the Commerce Department to end different and preferential treatment afforded to Hong Kong concerning mainland China. Exports to Hong Kong are now treated as exports to China under the EAR. License requirements for exports, re-exports, or transfers to Hong Kong will now be governed by license requirements that apply to China.
Because all these rules are now effective, organizations subject to U.S. export controls should ensure that they comply with these new rules.
Anti-Money Laundering:
The most notable gift of all is the sweeping Anti-Money Laundering legislation enacted into law on January 1, 2021. In what seemed to be a long and arduous journey, the Congress came out of its stupor and finally enacted the most significant overhaul in AML laws since the Patriot Act was passed in 2001.
So it will take a year to put the new laws in place, but here is a summary of key changes to expect:
Creation of a non-public Beneficial Ownership Registry maintained by FinCEN
Certain US Companies required to report their beneficial ownership information
Creation of a new whistleblower program for BSA/AML Violations
Stricter penalties for BSA/AML Violations
Streamlining Suspicious Activity Reporting (SAR) and Currency Transaction Reporting (CTR) and sharing SAR information with foreign branches.
Greater Information Sharing and Coordination among law enforcement agencies, national security agencies, financial institutions, and FinCEN.
DOJ granted broader authority to subpoena records from any foreign bank that maintains a correspondent account in the U.S. during criminal or BSA/AML violations’ investigation.
Will these changes be a game-changer? That remains to be seen. One thing is sure, for compliance officers, there’s much to prepare for in 2021.
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