OFAC continues to issue sanctions and associated guidance relating to a number of targeted jurisdictions. Starting with Iran, which has been the subject of new sanctions over recent months, and continuing with Venezuela, Ukraine, Nicaragua and Cuba, the following sets forth a summary of the more recent sanctions developments.
Recent Iranian Sanctions
On Sept. 18, 2019, President Trump announced that he ordered Treasury Secretary Steven Mnuchin to substantially increase sanctions imposed on Iran. This announcement came following a string of actions taken to increase the sanctions against Iran over the summer months.
Earlier this year, on May 8, 2019, President Trump signed Executive Order (“E.O.”) 13871, “Imposing Sanctions With Respect to the Iron, Steel, Aluminum and Copper Sectors of Iran,” designed to combat Iran’s access to weapons, counter Iran’s influence in the Middle East and deny the Iranian government revenue. In addition to blocking a broad range of transactions in the iron, steel, aluminum and copper sectors of Iran, the order authorizes sanctions on correspondent and payable-through accounts at foreign financial institutions (“FFIs”) determined to have knowingly conducted or facilitated significant transactions related to these sectors, to or from Iran or for or on behalf of individuals or entities blocked pursuant to this order. Specifically, among other things, the Secretary of the Treasury may prohibit the opening of, or impose strict restrictions on maintaining, correspondent or payable-through accounts in the United States by such FFIs.
In connection with the issuance of this new order, OFAC issued six new Frequently Asked Questions. These FAQs address the effect of the order, its effective date, the wind-down period, its applicable definitions and relationship with other sanctions and exceptions.
Additionally, on June 7, 2019, OFAC designated Persian Gulf Petrochemical Industries Company and its subsidiaries, pursuant to E.O. 13382, as amended, as Specially Designated Nationals (“SDNs”) for providing support to Khatam al-Anbiya, a person whose property and interests are blocked pursuant to E.O 13382, which authorized sanctions on weapons of mass destruction proliferators and their supporters.
On June 24, 2019, OFAC designated Iran’s Supreme Leader, his Office and persons appointed to certain official or other positions by the Supreme Leader or his Office, pursuant to E.O. 13876, as SDNs. On that same day, OFAC designated eight senior commanders of Navy, Aerospace and Ground Forces of the Islamic Revolutionary Corps, pursuant to E.O. 13224, as amended, as SDNs for their involvement in effectuating the Iranian regime’s destructive influence in the Middle East. On July 9, 2019, further sanctions were issued pursuant to E.O. 13224 against key Hizballah political and security figures.
On Aug. 28, 2019, OFAC targeted two Iranian regime-linked networks, pursuant to E.O. 13382, for engaging in procurement activities benefitting Iranian military organizations. Specifically, OFAC targeted the Dehgan Network, including two Iranian nationals (Hamed Dehghan and Hadi Dehgan), that have used a network of intermediary companies to facilitate proliferation-related transactions and the Shariat Network, including Asre Sanat Eshragh Company and its owner Seyed Hossein Shariat, that procured large amounts of aluminum alloy products for multiple Iranian entities.
On Sept. 4, 2019, OFAC, pursuant to E.O. 13224, identified 16 entities, 10 individuals and 11 vessels as part of a large shipping network that is directed by and financially supports the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and added them to the SDN List.
On Sept. 20, 2019, OFAC, based on its authority under E.O. 13224, took action against the Central Bank of Iran (CBI), the National Development Fund of Iran (NDF), which is Iran's sovereign wealth fund, and Etemad Tejarate Pars Co. by blocking all property and interests in property of these entities. The Secretary of the Treasury stated this action was based on the fact that these entities provided “crucial funding” that the Iranian regime “uses to support its terrorist network, including the Qoods Force, Hizballah and other militants that spread terror and destabilize the region.”
On Sept. 25, 2019, OFAC issued a new FAQ, discussing the Secretary of State’s Sept. 25, 2019 determination that COSCO Shipping Tanker (Dalian) Co. and COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co. meet the criteria for the imposition of sanctions with respect to Iran under E.O. 13846 and clarifying that sanctions do not apply to the ultimate parent company, COSCO Shipping Corporation Ltd. (COSCO).
Recent Venezuela Sanctions
Between April 17 and July 3, 2019, OFAC designated additional entities and individuals in Venezuela as SDNs pursuant to E.O. 13850, as amended, and E.O. 13692, as amended. On April 17, 2019, Banco Central de Venezuela (also known as the Central Bank of Venezuela) and the bank’s director, Iliana Josefa Ruzza Terán, were designated as SDNs for operating in the financial sector of the Venezuelan economy. In addition, OFAC continues to target the political regime of President Nicolas Maduro Moros (“Maduro”). On June 27 and 28, 2019, several former officials from Maduro’s regime, including Maduro’s son, were designated as SDNs as a result of their positions as former officials of the Government of Venezuela.
As a result of these designations, all property and interests in property of the above-named entities and individuals, and any entity that is owned, directly or indirectly, 50 % or more by the designated entities or individual, that are in the U.S. or in the possession or control of U.S. persons, are blocked.
In connection with the April 17, 2019 designations, OFAC added two new general licenses, amended five existing general licenses and issued one new FAQ. In its newly issued FAQ, OFAC clarified its position that despite the new sanctions, it is “committed to ensuring that humanitarian assistance and non-commercial, personal remittances can flow to the people of Venezuela.”
On June 6 and 26, 2019, OFAC further amended four existing licenses related to activities involving entities related to Petróleos de Venezuela, S.A. (“PdVSA”), and issued one new FAQ. In this FAQ, OFAC clarified that persons subject to U.S. jurisdiction cannot export or reexport diluents, directly or indirectly, to Venezuela, or engage in transactions or activities related thereto.
On July 3, 2019, Cubametales, a Cuban state-run oil company, was designated an SDN, pursuant to E.O. 13850, as amended, for providing support to Maduro. In connection with this designation, OFAC delisted PB Tankers S.p.A. (“PB Tankers”) and its related entities, because PB Tankers terminated its charter agreement with Cubametales and took other steps to prevent future sanctionable activity.
On Aug. 5, 2019 the President issued E.O. 13884, blocking all property and property interests in the Government of Venezuela and authorizing the Treasury Department to sanction additional persons who have assisted or supported the Government of Venezuela, including through the provision of goods or services. While E.O. 13884 continues to allow transactions with the Venezuelan private sector, given that the government of Venezuela owns or controls such large portions of the economy, the practical scope of E.O. 13884 is quite broad.
In connection with the newly issued E.O. 13884, OFAC amended 12 preexisting general licenses and issued 13 new general licenses. Additionally, in response to E.O. 13884, OFAC issued three new FAQs. FAQ 679 clarifies that U.S. support for Interim President Guaidó is still permitted through the issuance of General License 31. FAQ 680 affirms that under the blocking sanctions imposed by E.O. 13884, U.S. persons are generally prohibited from engaging in transactions with the Government of Venezuela or with entities owned 50 % or more by the Government and that OFAC expects financial institutions to conduct due diligence to confirm that customers are not persons whose property and interests are blocked. Finally, FAQ 681 clarifies that General License 28 does not extend to the wind-down periods that have already expired regarding PdVSA, the Central Bank of Venezuela and of blocked persons.
On Sept. 9, 2019, OFAC published an additional general license authorizing transactions involving certain Government of Venezuela persons. Specifically, the new general license authorizes transactions with the Government of Venezuela provided that the individuals are (i) U.S. citizens, (ii) permanent resident aliens of the United States, (iii) individuals in the United States who have a valid U.S. immigrant or nonimmigrant visa and (iv) former employees and contractors of the Government of Venezuela. In connection with this license, OFAC published a revised FAQ 680 to reflect the authorizations granted by the new general license and provide additional clarity on the prohibitions in E.O. 13884.
On Sept. 30, 2019, OFAC amended two general licenses, including General License No. 3G, “Authorizing Transactions Related to, Provision of Financing for, and Other Dealings in Certain Bonds” and General License 9F, “Authorizing Transactions Relating to Dealings in Certain Securities,” extending the expiration for these licenses until March 31, 2020.
Ukrainian General License Extensions
On June 26, 2019, OFAC extended the expiration date of two general licenses related to the GAZ Group (“GAZ”). General License 13L now authorizes certain transactions necessary to divest or transfer debt, equity, or other holdings in GAZ through Nov. 8, 2019 at 12:01 am EST. General License 15F now authorizes certain activities necessary to maintain or wind-down operations or existing contracts with GAZ through Nov. 8, 2019 at 12:01 am EST as well. In addition to this extension, General License 15F authorizes the installation of automotive safety systems consistent with applicable regulatory requirements in vehicles produced by GAZ Group or any other entity in which GAZ Group owns, for the same time period.
OFAC issued regulations to implement E.O. 13851, which blocked property of certain persons contributing to the violent response by the Government of Nicaragua to protests that began on April 18, 2018 and the Ortega regime’s dismantling and undermining of democratic institutions. The proposed regulations took effect on Sept. 4, 2019. OFAC intends to further supplement these regulations with a more comprehensive set of regulations and additional interpretive and definitional guidance, general licenses and statements of licensing policy.
Updated Cuban Assets Control Regulations (“CACR”)
On Sept. 9, 2019, OFAC published an amendment to the CACR, to further implement the President’s foreign policy toward Cuba by “denying Cuba access to hard currency” and “curbing the Cuban government’s bad behavior while continuing to support the long-suffering people of Cuba.” The Amendment became effective on Oct. 9, 2019. In connection with the amendments, OFAC published updated FAQs and a Fact Sheet. The updated FAQs makes clear that the Sept. 9 amendments revise certain authorizations for remittances to Cuba, eliminate the authorization for donative remittances, and revise the authorization commonly known as the “U-Turn” general license. In connection with the U-Turn general license, the amendment removes the authorization for banking institutions subject to U.S. jurisdiction to process certain fund transfers originating and terminating outside the United States. These banking institutions will be authorized to reject such transactions, but they may no longer process the transactions.
Counterterrorism Sanctions Authority Expanded
On Sept. 9, 2019, the President issued E.O. 13886 “Modernizing Sanctions to Combat Terrorism.” E.O. 13886 amends E.O.13224 which was issued by President Bush in 2001, and rescinds E.O. 12947 issued by President Clinton. E.O. 13886 is aimed at giving the government a wider array of tools to sanction terrorist groups and their funders, as well as a unified approach. The E.O. gives federal agencies the authority to target terrorist leaders and those who participate in terrorist training and permits secondary sanctions against financial institutions that aid terrorists. As a follow-up, the treasury department sanctioned a number of terrorist organizations, including al-Qaida, Hamas, the Islamic State Militant Group and Iran's Quds Forces. The treasury department also labeled a Syrian-based al Qaida affiliate group as a specially designated global terrorist entity.
Kingpin Act Designations and Recent Settlement
On Aug. 20, 2019, OFAC designated Dominican national Cesar Emilio Peralta and the Peralta Drug Trafficking Organization (“Peralta DTO”), pursuant to the Foreign Narcotics Kingpin Designation Act. OFAC designated eight additional Dominican nationals for assisting Peralta and the Peralta DTO, as well as six entities in Santo Domingo, Dominican Republic. These designations target significant foreign narcotics trafficking through the Dominican Republic and to consumer markets in the United States, Puerto Rico and Europe. OFAC’s Kingpin designations were closely coordinated with the Drug Enforcement Administration and the Federal Bureau of Investigation, and further OFAC’s commitment to countering criminal networks that engage in human trafficking. The following day, OFAC additionally designated several Chinese individuals, pursuant to the Kingpin Act.
In addition to recent Kingpin designations, on Aug. 16, 2019, OFAC settled with Atradius Trade Credit Insurance Inc. (“Atradius”), of Hunt Valley, Maryland, accepting a payment of $345,315 for apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations. Atradius had agreed to accept the assignment of debt owed by Grup Wisa S.A. (“Grupo Wisa”), an SDN. Atradius then filed a creditor claim in Panama and ultimately received a payment of approximately $4 million in satisfaction of that debt. OFAC determined that, by accepting the assignment of Grupo Wisa’s debt and receiving payment from Grupo Wisa’s liquidation, Atradius dealt in the property or interests in property of an SDN in violation of 31 C.F.R. § 598.203(a). This enforcement action highlights the importance of diligence regarding any transaction with an SDN.
Given the breadth and frequency of the recent changes across multiple sanctions programs in recent months, it is important to stay abreast of OFAC’s actions and continuing developments related to all sanctions programs.