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Top Story Security Related

02/15/2024

OFAC sanctions network smuggling U.S. tech to Central Bank of Iran

The U.S. Department of the Treasury yesterday announced that OFAC has a procurement network responsible for facilitating the illegal export of goods and technology from over two dozen U.S. companies to end-users in Iran, including the Central Bank of Iran (CBI), which is designated for its role in providing financial support to the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and Hizballah. These designations target three individuals and four entities tied to the procurement of sophisticated U.S. technology for use by CBI in violation of U.S. export restrictions and sanctions.

Among the goods and technology acquired by CBI were items classified as information security items subject to national security and anti-terrorism controls by the U.S. Department of Commerce’s Bureau of Industry and Security.

For the names and identification information of the designated entities and individuals, see BankersOnline's February 14, 2024, OFAC Update.

02/14/2024

FinCEN sees increase in reports of use of CVC for child exploitation and human trafficking

Yesterday, FinCEN issued a Financial Trend Analysis (FTA) reflecting an increase in Bank Secrecy Act (BSA) reporting associated with the use of convertible virtual currency (CVC) and online child sexual exploitation (OCSE) and human trafficking. This FTA is based on BSA reporting filed between January 2020 and December 2021.

The analysis detailed in this FTA furthers Treasury efforts to combat human trafficking as well as the illicit uses of CVC. For example, Brian Nelson, Treasury’s Under Secretary for Terrorism and Financial Intelligence, announced at the President’s Interagency Task Force to Monitor and Combat Trafficking that FinCEN has joined the Canadian financial intelligence unit’s Project Protect—a flagship public-private partnership on human trafficking. In addition, in June 2021, FinCEN identified human trafficking and cybercrime as among the “Anti-Money Laundering and Countering the Financing of Terrorism National Priorities” issued pursuant to the Anti-Money Laundering Act of 2020.

More recently, in October 2023, FinCEN issued a finding pursuant to Section 311 of the USA PATRIOT Act that CVC mixing is a class of transactions of primary money laundering concern and proposed reporting requirements to increase transparency in connection with CVC mixing.

FinCEN’s analysis highlights the value of BSA reporting filed by regulated financial institutions.

02/14/2024

FinCEN proposes AML/CFT requirements for some investment advisors

FinCEN has issued a Notice of Proposed Rulemaking to be published in the February 15, 2024, Federal Register that would require certain investment advisers to apply Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) requirements pursuant to the Bank Secrecy Act (BSA), including implementing risk-based AML/CFT programs, reporting suspicious activity to FinCEN, and fulfilling recordkeeping requirements.

The proposed rule would add investment advisers to the list of businesses classified as “financial institutions” under the BSA. Investment advisers registered with the Securities and Exchange Commission (SEC), as well as those that report to the SEC as exempt reporting advisers, would be required to implement AML/CFT programs. They would also be required to file suspicious activity reports, fulfill certain recordkeeping requirements, and fulfill other obligations applicable to financial institutions subject to the BSA and FinCEN’s implementing regulations.

The proposed rule would also apply information-sharing provisions between and among FinCEN, law enforcement government agencies, and certain financial institutions, along with special measures that have been applied under Section 311 of the USA PATRIOT Act. Finally, FinCEN is proposing to delegate examination authority for this rule to the SEC given the SEC’s expertise in the regulation of investment advisers and experience in examining other financial institutions with respect to AML/CFT responsibilities.

Treasury today also published its risk assessment of this sector, which identifies illicit finance threats and vulnerabilities in the sector, including how the uneven application of AML/CFT requirements across the sector allows both legitimate and illicit investors to “shop around” for an adviser who does not need to inquire into their source of wealth.

Comments on the proposal are due by April 15, 2025.

02/09/2024

U.S. targets price cap violators and implements Russian diamond ban

Yesterday, the Treasury Department announced that OFAC has taken its second Russian oil price cap enforcement action of 2024, imposing sanctions on four entities and identifying one vessel as blocked property. The network of these entities and the vessel were involved in a price cap violation scheme in late 2023.

OFAC also issued two new determinations that implement G7 commitments to ban the importation of Russian diamonds. First, OFAC issued a determination prohibiting the importation of on non-industrial diamonds mined or extracted in Russia, notwithstanding whether they have been substantially transformed in a third country, effective beginning on March 1, 2024 for certain categories of diamonds, and expanding on September 1, 2024 to include additional categories. Second, OFAC issued a determination prohibiting the importation of diamond jewelry and unsorted diamonds of Russian Federation origin or exported from the Russian Federation, effective March 1, 2024.

For identification information on the designated entities and vessel and links to the Determinations and a related General License, see BankersOnline's February 8, 2024, OFAC Update.

02/08/2024

U.S. sanctions Equador's Los Choneros gang and its leader

The Treasury Department has reported that OFAC has sanctioned one of Ecuador’s most violent gangs, Los Choneros, and its leader, José Adolfo Macías Villamar (a/k/a “Fito”), pursuant to counter narcotics authorities.

For identification information on Los Choneros and Macías Villamar, see BankersOnline's February 7, 2024, OFAC Update.

02/08/2024

FinCEN to publish proposed AML regs for residential real estate transfers

FinCEN has filed a notice of proposed rulemaking for publication in the February 16, 2024, Federal Register that would require certain persons involved in real estate closings and settlements to submit reports and keep records on identified non-financed transfers of residential real property to specified legal entities and trusts on a nationwide basis.

Transfers made directly to an individual would not be covered by this proposed rule. The proposed rule describes the circumstances in which a Real Estate Report (a streamlined version of a Suspicious Activity Report) must be filed, who must file a Real Estate Report, what information must be provided, and when such a report is due. These reports are expected to assist the U.S. Department of the Treasury; Federal, State, and local law enforcement; and national security agencies in addressing illicit finance vulnerabilities in the U.S. residential real estate sector and to curtail the ability of illicit actors to anonymously launder illicit proceeds through the purchase of residential real property, which threatens U.S. economic and national security.

Under the proposed rule, persons involved in real estate closings and settlements would continue to be exempt from the anti-money laundering compliance program requirements of the Bank Secrecy Act. However, as provided in 31 CFR 1010.205(c), no such exemption applies for a financial institution that is otherwise required to establish an anti-money laundering program.

Comments will be accepted for 60 days following publication (through April 16, 2024).

02/05/2024

OFAC targets Iranian procurement network and malicious cyber actors

The Treasury Department on Friday announced sanctions against a transnational procurement network supporting Iran's ballistic missile and unmanned aerial vehicle (UAV) programs.

In a separate release, Treasury announced sanctions against actors responsible for malicious cyber activities on critical infrastructure in the U.S. and other countries.

For the names and identification information of the designated individuals and entities, see BankersOnline's February 2, 2024, OFAC Update.

02/02/2024

New Executive Order and sanctions program announced

OFAC has announced that the president has signed a new Executive Order, “Imposing Certain Sanctions on Persons Undermining Peace, Security, and Stability in the West Bank.”

Under the authority of the new Executive Order, OFAC added four Israeli nationals to its SDN List, with the new "Middle-East-EO" sanctions program tag. For identification information on those individuals, see BankersOnline's February 1, 2024, OFAC Update.

02/02/2024

FinCEN alert on Israeli extremist settler violence against Palestinians

FinCEN, in an announcement coordinated with OFAC's reporting of a new Executive Order and sanctions program, reported it had issued an Alert related to the financing of Israeli extremist settler violence against Palestinians in the West Bank. The alert provides select red flags to assist U.S. financial institutions in identifying and reporting suspicious activity that finances such violence.

While the alert highlights the potential involvement of certain nonprofit organizations (NPOs) in facilitating payments to fund violence in the West Bank, FinCEN continues to emphasize that legitimate charities should have access to financial services and can transmit funds through legitimate and transparent channels. FinCEN is also reminding financial institutions to apply a risk-based approach to Customer Due Diligence requirements when developing the risk profiles of charities and other non-profit customers. No specific customer types, including charities and NPOs, automatically present a higher risk of illicit activity.

The Alert cited red flag indicators to help detect, prevent, and report potential suspicious activity related to the financing of Israeli extremist settler violence against Palestinians in the West Bank, but advised that "no single red flag is necessarily indicative of illicit or suspicious activity, U.S. financial institutions are encouraged to consider all the surrounding facts and circumstances before determining whether a specific transaction is suspicious or associated with potential Israeli violent extremist groups or campaigns."

FinCEN asked that financial institutions reference the alert in SAR field 2 and the narrative by including the key term "FIN-2024-WBEXTREMISM."

02/01/2024

OCC fines City National Bank $65 million for deficiencies

The Office of the Comptroller of the Currency yesterday announced it has assessed a $65 million civil money penalty against City National Bank, of Los Angeles, California, related to systemic deficiencies in the Bank’s risk management and internal controls.

The OCC found that the bank engaged in unsafe or unsound practices, including its failure to establish effective risk management and internal controls. This failure also resulted in noncompliance with 12 CFR Part 30, Appendix D, “OCC Guidelines Establishing Heightened Standards for Certain Large Insured National Banks, Insured Federal Savings Associations, and Insured Federal Branches.” The bank also violated the Bank Secrecy Act (BSA) and 12 CFR Part 9 – Fiduciary Activities of National Banks.

The OCC also issued a consent order requiring the bank to take broad and comprehensive corrective actions to improve its strategic plan, operational risk management, including internal controls; compliance risk management, including BSA/anti-money laundering and fair lending; strategic risk management; and investment management practices.

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