Effective April 16, 2016, the United States will implement sanctions pursuant to the Hizballah International Financing Prevention Act of 2015. The new sanctions target Hizballah (or Hezbollah) and non-U.S. persons who support and finance Hizballah’s operations.
Summary of Prohibitions
The U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) maintains these new sanctions measures under the Hizballah Financial Sanctions Regulations (“HSFR”)(31 C.F.R. 566). The HSFR generally prohibit foreign financial institutions (“FFI") from knowingly facilitating or engaging in:
- A significant transaction for Hizballah.
- A significant transaction for a person placed on the Specially Designated Nationals and Blocked Persons List (“SDN List”) as a result of its involvement with Hizballah.
- Money laundering to carry out the foregoing activities.
- A significant transaction or providing significant financial services to carry out the foregoing activities.
In determining whether a transaction is “significant,” the OFAC may consider the totality of circumstances. A full set of factors is described in the implementing regulations (see 31 C.F.R. 566.404). Notably, the restrictions for FFIs described above mirror secondary sanctions previously in place against Iran.
Potential Penalties and Additional Considerations
If an FFI is deemed to have violated these regulations, the President must prohibit or impose “strict conditions” on that FFI’s ability to open or maintain a correspondent or payable-through account in the U.S. In addition, any person that violates, or causes a violation of, these regulations may be subject to civil penalties (the greater of US$250 thousand or twice the amount of the violation) or criminal penalties (up to US$1 million and/or 20 years imprisonment).
The U.S. had previously designated Hizballah on the SDN List pursuant to various sanctions laws and regulations relating to Syria; these measures functionally precluded U.S. persons from any dealing with Hizballah (including entities Hizballah owns or controls). The new regulations serve notice to the non-U.S. financial sector that the U.S. government is actively scrutinizing dealings with Hizballah.
In order to comply with these new measures, we recommend companies remain vigilant in screening all parties to contemplated transactions for connections to individuals or entities listed above as well as entities or individuals listed on the SDN List.