Global Regulation, Local Solutions Emerging Themes 2020 - Page 60



FINANCIAL CRIME AND INVESTIGATIONS
THE LONG ARM
OF OFAC
NON-US ENTITIES SHOULD STILL
BE MINDFUL OF THE REACH OF
US SANCTIONS
EMERGING THEMES 2020
Despite most aspects of US sanctions
programmes focusing on US persons (i.e., US
citizens, permanent residents, anyone physically
located in the United States, and companies
organised under the laws of a state or territory
within the United States), all programmes have
provisions that make it a violation for anyone
(US or non-US) to avoid or evade the sanctions,
as well as to cause another party to violate the
sanctions. Moreover, the US sanctions against
Cuba and Iran require non-US subsidiaries of
US persons to comply with all aspects of those
sanctions programmes.
2017-19
14
US sanctions
enforcement
actions relating to
financial services
Failure to provide full information about
transactions or to address red flags in
transactions are among the common themes
in these recent OFAC enforcement cases. For
financial institutions, this included not disclosing
the involvement of sanctioned parties or links to
sanctioned destinations for transactions that
were ultimately processed to or through the
United States.
Corporates based outside the US continue to find
themselves targets of US sanctions enforcement
actions, with significant consequences attaching.
Financial institutions continue to be a focus of
enforcement efforts; in the last three years, there
have been 14 US sanctions enforcement actions
relating to financial services, making it the most
prevalent industry among settlements published
by the US Office of Foreign Assets Control (“OFAC”).
Of the 2019 settlements with OFAC, the two highest
settlement amounts by early December were against
non-US financial institutions – each resulted in
financial penalties of over $600 million.
60/
OFAC’s wide reach for enforcement of US
sanctions makes it critical that all financial
institutions, wherever they are based, address
risks under US sanctions as part of their
sanctions compliance programmes.
This includes:
X
Monitoring risks that could be triggered by
engaging in transactions with destinations or
parties targeted by US sanctions
X
Ensuring transparency in all transactions,
including by providing information regarding
any sanctioned persons or destinations
involved in the transaction to intermediaries
X
Carefully considering the relevance of US
sanctions for any transaction that may have
a US nexus, even if your entity is not a US
person. A US nexus may include, for example,
transactions that will be processed to or
through a US financial institution or its
non-US branch.
Attention is also warranted to US secondary
sanctions, which target foreign persons
engaging in activities that may otherwise
have no US jurisdictional connection. Taking
actions contrary to US secondary sanctions
will not result in a violation or imposition of a
penalty pursuant to an enforcement action.
However, such actions can result in an entity
being prohibited from opening or maintaining
correspondent or payable through accounts
in the United States or being named as a
Specially Designated National. Such an
outcome may well be much more costly than
a financial penalty, as SDN status will severely
curtail your pool of clients and business
partners. Addressing these secondary sanctions
risks in sanctions compliance programmes is
therefore also very important.
MEGAN BARNHILL
Partner,
Washington DC
SUSAN KOVAROVICS
Partner,
Washington DC
/61

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