SanctionsAlert.com Sanctions Round Up
May 30, 2018

FinCEN CDD Rule Comes into Effect; FFIEC Issues Guidance for Compliance Suites, including for OFAC Officers

On May 11, 2018, exactly two years after being issued, the Financial Crimes Enforcement Network (“FinCEN”)’s implemented its new Customer Due Diligence (CDD) Rule. This CDD rule enhances CDD requirements and also adds a new requirement for financial institutions to identify, and verify the identity of, the beneficial owners of certain legal entity customers.

OFAC Compliance Officers should take notice, as US Treasury expects financial institutions to use beneficial ownership information not only to comply with AML requirements, but also for compliance with the OFAC regulations. You are required to use beneficial ownership information to help ensure that you do not open or maintain an account, or otherwise engage in prohibited transactions or dealings involving individuals or entities subject to OFAC- administered sanctions.

On May 11, 2018,the Federal Financial Institutions Examination Council (FFIEC) issued new examination procedures with regard to FinCEN’s CDD rule, and a Press Release.The new procedures replace those in the current “Customer Due Diligence — Overview and Examination Procedures” section of the FFIEC’s Bank Secrecy Act/Anti-Money Laundering Examination Manual and give some guidance on how the federal bank examiners may conduct examinations for compliance with the new CDD Rule requirements.

The new procedures reiterate the application of the new rule for OFAC compliance by saying: “Customer information collected under the CDD rule may be relevant to other regulatory requirements, including but not limited to (…) determining OFAC sanctioned parties.”

An example of how this applies in practice is that OFAC requires financial institutions to block accounts (or other property and interests in property) of, among others, persons appearing on the Specially Designated Nationals and Blocked Persons List (SDN List), which includes any entity that is 50 percent or more owned by a blocked person, regardless of whether the entity is formally listed on the SDN List.

Finally, on May 16, 2018, FinCEN issued a Ruling to provide a “90-day limited exceptive relief to covered financial institutions from the obligations of the Beneficial Ownership Requirements for Legal Entity Customers with respect to certain financial products and services that automatically rollover or renew (i.e., certificate of deposits (CDs) or loan accounts) that were established before… May 11, 2016”.  This exception will expire on August 9, 2018.

In order to properly prepare for a bank examination of your OFAC program, click here to join us for our Full Day OFAC Essentials Seminar in Miami, FL on June 15, or our July 12th webinar on: “Preparing for a Regulatory Examination of Your Financial Institution’s OFAC Program.

U.S. Shocks the World by Withdrawing from Iran Nuclear Agreement – Europe Gets Ready to Activate Blocking Statute

On May 8, 2018, President Trump announced that the U.S. would be withdrawing from the Iran nuclear deal. The agreement, officially known as the Joint Comprehensive Plan of Action (JCPOA), was reached in 2015 by Iran and major world powers – U.K., China, France, Germany, Russia and the U.S (the ‘P5’) in hopes of halting Iran’s nuclear capabilities.

President Trump’s decision to restore nuclear-related sanctions is effective immediately, and will affect many industries, including aircraft, oil and gas, banking. The U.S. government says it will restore the strict sanctions it imposed on Iran before the 2015 deal and is considering new penalties.

The decision to withdraw leaves the JCPOA in tatters and creates a host of new challenges for sanctions compliance officers worldwide.

In defiance to the U.S. decision to sever the Iran deal, E.U. leaders have decided to activate the so-called Blocking Regulation (formerly Regulation 2271/96), which would ban European companies, under threat of punishment, from complying with U.S. sanctions against Iran. In order to activate the Blocking Regulation, the E.U. will need to update the law to include Donald Trump’s sanctions, a process that could take up to two months, depending on how fast the European Parliament and Council vote on the update.

For more information on this as well as important compliance deadlines, click here.

UK Government passes Sanctions Bill; requires Transparency in Offshore Tax havens

On May 23, 2018, the long anticipated U.K. Sanctions and Anti-Money Laundering Bill received Royal Assent and became an Act of Parliament. The new law, now called the Sanctions and Anti-Money Laundering Act 2018, will create a new sanctions regime for the UK after the country’s anticipated departure from the European Union in April 2019.

Before the Act was finalised, and in surprise support of a backbench amendment designed to stem the global flow of “dirty money”, a new clause was added in relation to transparency on May 1. The new Act will now require most of the UK’s Overseas Territories to make public the identities of the beneficial owners of all their registered companies by the end of 2020.

The amendment will introduce public ownership registers, which will require certain territories to publish details of the true owners of companies based there as well as their offshore assets. Notably, the new measure will not apply to the Crown Dependencies of: Jersey, Guernsey and the Isle of Man. Currently only four overseas territories have beneficial ownership registers in place, but the information they contain is only made available on request to law-enforcement agencies.

Despite being seen as a giant leap forward by those who support global transparency, the vote is expected to be vigorously opposed by the governments of many U.K. Overseas Territories, which regard such a regulation as a step too far on the part of the British government.

For further updates on the U.K. and the potential impact of ‘Brexit’, join us on September 13th for a webinar on: “The Potential Affects of Brexit on U.K. Sanctions Law and How Compliance Officers Can Prepare for the Switch”.

EU Strengthens Export Controls and Sanctions against Burma

On April 26, 2018, the E.U. amended its Burma (also known as Myanmar) sanctions regime to extend and strengthen its measures against the South Asian country.

Despite lifting all trade and financial restrictions back in April 2013 due to perceived positive developments in Burma’s efforts against corruption (Council Decision 2013/184/CFSP), the E.U. has now amended that Decision (Council Decision 2018/655/CFSP) to once again impose some restrictive measures on Burma. These restrictive measures came into force on April 27, 2018.

Now, in addition to an arms embargo and trade controls on the supply of items that may be used for internal repression, the new restrictive measures also prohibit:

  • the export of dual-use goods for military and Border Guard Police end users; and
  • restrictions on the export of equipment for monitoring communications that might be used for internal repression.

In addition, the Council of the E.U. has frozen the assets of natural persons from the Myanmar Armed Forces (Tatmadaw) and the Border Guard Police (Council Regulation (EU) 2018/647).

The U.S.  Treasury’s Office of Foreign Assets Control (OFAC) terminated their Burmese Sanctions Regulations (BSR) on October 7, 2016. The BSR was subsequently removed from the Code of Federal Regulations on June 16, 2017. While the country program against Burma was terminated, the U.S. does maintain “targeted sanctions” against certain individuals or companies in Burma, by placing them on the SDN list. A SDN look up with search term “Burma” in the country field, shows 35 results, under a variety of sanctions programs, include Global Magnitsky, which is related to human rights abuses.

To keep up-to-date with these and other sanctions regimes by country, see SanctionsAlert.com Interactive Sanctions Map.

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