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Indictment Alleges that Bank and its Officers Used Front Companies to Evade Prohibitions on Iran’s Access to the U.S. Financial System

The U.S. Attorney for the Southern District of New York has charged Turkish state-owned bank Halkbank (formally known as Türkiye Halk Bankasi A.S.) with money laundering, bank fraud and sanctions offenses under the International Emergency Economic Powers Act, or IEEPA, arising from the Bank’s alleged involvement in a multibillion-dollar scheme to evade U.S. sanctions on Iran. As alleged in the six-count indictment, senior officials at Halkbank designed and executed the Bank’s systemic and illicit movement of Iranian oil revenue moving through the Bank to give Iran access to the funds. This case is an extension of prosecutions initiated in late 2017 against nine individual defendants in the scheme, including bank employees and the former Turkish Minister of the Economy.
Continue Reading  DOJ Charges Turkish State-Owned Halkbank With Money Laundering, Fraud, and Iran-Related Sanctions Offenses

Foreign Banks Reliant on U.S. Correspondent Services Should Take Note of New Rules

We are pleased to present this guest blog by Hdeel Abdelhady, who is a Washington, D.C.-based attorney and Principal at MassPoint Legal and Strategy Advisory PLLC, her boutique law and strategy firm. Ms. Abdelhady focuses on regulatory compliance and transactional matters, including cross-border trade and finance transactions and regulation.

As Ms. Abdelhady discusses, the Office of Foreign Assets Control (OFAC) issued on June 21, 2019 an interim final rule (the “IFR”) amending provisions of the Reporting, Procedures, and Penalties Regulations applicable to OFAC-administered sanctions programs at 31 C.F.R. Part 501. The IFR became effective upon publication in the Federal Register on June 21. OFAC has requested public comments, which are due by July 22, 2019. The IFR has many important potential consequences, including for foreign banks that rely on U.S. correspondent banking services, as well as U.S. financial institutions facing additional compliance burdens.

As legal counsel to U.S. and foreign banks, other financial services providers, and businesses, Ms. Abdelhady has advised on sanctions, anti-money laundering, anti-corruption, and counter-terrorism finance regulation and compliance under U.S. law and international standards, including the FATF Recommendations and Wolfsberg Standards. She has served as in-house counsel on secondment to banks in the United States and abroad, including in connection with the first major USA Patriot Act enforcement by the Comptroller of the Currency and Financial Crimes Enforcement Network (FinCEN). In addition, Ms. Abdelhady has advised on the establishment of money services businesses and Foreign Banking Organizations in the United States.

Ms. Abdelhady serves on the board of the Washington, D.C. Chapter of the Association of Certified Financial Crime Specialists (ACFCS), is a Fellow of the American Bar Foundation, and is an Adjunct Professor at The George Washington University Law School. Ms. Abdelhady writes frequently on banking, finance, and regulatory compliance matters. Among other publications, Reuters, the World Bank Legal Review, and Law360 has published her work.  We hope that you enjoy this discussion by Ms. Abdelhady of this important development.  –Peter Hardy

In addition to effectuating technical and conforming amendments, the IFR revises Trading With the Enemy Act (TWEA) penalties and amends reporting requirements and procedures applicable to initial and annual blocked property reports, unblocked property reports, and the unblocking of funds due to mistaken identity. Additionally, the IFR revises reporting requirements applicable to “rejected transactions.” The rejected transactions amendment is the most substantial of the revisions, and is the focus of this update.
Continue Reading  OFAC’s Revised Reporting Rules Create New Compliance Requirements for All U.S. Persons

UK-based Standard Chartered Bank (“SCB”) announced the terms of significant settlements last week with various U.S. and U.K. governmental agencies, resolving a series of related investigations into the bank’s alleged violations of international sanctions and concomitant failures of anti-money laundering (“AML”) controls over a period stretching from 2007 to 2014. The bank will pay a total of $1.1 billion in combined forfeitures and fines to various national and state agencies in the two countries — and extend, once again, its deferred prosecution agreements (“DPAs”) with the U.S. Department of Justice (“DOJ”) and the New York County District Attorney’s Office (“NYDA”).

Specifically, the bank will pay: a $480 million fine and a $240 million forfeiture to the DOJ; approximately $639 million to the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”); over $292 million to the NYDA; almost $164 million to the Board of Governors of the Federal Reserve System; and $180 million to the New York Department of Financial Services.  The bank also will pay over £102 million (an amount approximately equal to over $133 million) to the U.K.’s Financial Conduct Authority (“FCA”).  After certain payments are credited against some of these penalties, the total will exceed $1 billion.

Continue Reading  Standard Chartered Bank Enters Combined $1 Billion+ Settlement with U.S. and U.K. Authorities Over Iranian Financial Transactions

The Office of Foreign Assets Control (“OFAC”) wrapped up 2017 by issuing a series of high-profile designations generally prohibiting U.S. persons from conducting financial or other transactions with the identified individuals and entities, and freezing any assets which these individuals and entities may have under U.S. jurisdiction. Specifically, OFAC, acting in conjunction with a new Executive Order issued by the President pursuant to the Global Magnitsky Human Rights Accountability Act (“Magnitsky Act”), sanctioned on December 21 a list of alleged international bad actors, including Dan Gertler, a billionaire and international businessman from Israel who has been involved in, among other notorious ventures, alleged corruption in the mining of diamonds and copper in the Democratic Republic of the Congo. The next day, OFAC then sanctioned individuals and entities allegedly associated with Thieves-in-Law, an alleged and unapologetically-named Eurasian criminal entity; according to the U.S. government, Thieves-in-Law originated in Stalinist prison camps and has grown over time into a “vast criminal organization” stretching across the globe and into the United States.
Continue Reading  OFAC Designates Diamond Mining Billionaire, “Thieves in Law,” and Many Other International Targets as Subject to U.S. Sanctions and Asset Freezes

On November 9, 2017, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) amended the Cuban Assets Control Regulations, 31 C.F.R. part 515 (the “CACR”), with the stated intent of channeling economic activities away from the Cuban military, intelligence, and security services, while maintaining opportunities for Americans to engage in authorized travel to Cuba and support the private, small business sector in Cuba. These amendments implement the National Security Presidential Memorandum (“NSPM”), “Strengthening the Policy of the United States Toward Cuba,” which was signed on June 16, 2017.  While the changes may limit certain new business opportunities in Cuba for Americans, they also provide clarity regarding with whom Americans may not do business, and should be considered accordingly by institutions in regards to tailoring their Anti-Money Laundering (“AML”) and OFAC-related due diligence and compliance procedures.
Continue Reading  OFAC Increases Clarity Regarding Financial Transactions with Cuba

As widely reported, the Spanish police raided last year the Madrid offices of the Chinese state-run Industrial and Commercial Bank of China (“ICBC”), the world’s biggest bank by assets. In the nearly 18 months following that raid and the numerous arrests made at that time, very little information about this money laundering investigation became known publically. That is, until Reuters recently published a lengthy article resulting from its review of “thousands of pages of confidential case submissions” and its “interviews with investigators and former ICBC employees.” The article raises numerous questions regarding the enforcement of European money laundering laws against Chinese banks operating abroad, as well as certain unique political and diplomatic considerations that may exist in those enforcement efforts. Below, we will compare these efforts with similar U.S. enforcement efforts, which are potentially gaining steam.
Continue Reading  High-Profile Spanish Money Laundering Investigation of Chinese Bank Raises Questions About Future of Similar U.S. Enforcement

Two days after North Korea’s successful long-range ballistic missile test, the U.S. District Court for the District of Columbia unsealed a memorandum opinion which granted the Department of Justice “damming” warrants to seize all funds in bank accounts belonging to five Chinese companies which allegedly were used to hide transactions with North Korea using U.S. currency in violation of U.S. sanctions and money laundering laws. The underlying conduct allegedly resulted in over $700 million of prohibited transactions being processed by eight international banks. The opinion is noteworthy not only because it demonstrates the important relationship between money laundering laws and foreign policy, but also for the government’s use of anticipatory warrants to seize the assets upon arrival to the targeted accounts, and to prevent those assets from exiting.

Continue Reading  Damming the Funding to North Korea:  Anticipatory Seizure Warrants as a Tool to Enforce Sanctions and Thwart Money Laundering Transfers

IED Bomb still lifeOn March 24, 2017, the U.S. Department of Justice unsealed an indictment charging Kassim Tajideen, an alleged prominent financial supporter of the Hizballah terror organization, with evading U.S. sanctions and conspiring to commit money laundering.  Tajideen, of Beirut, Lebanon, was arrested in Morocco earlier this month and has made his initial appearance in federal court…