U.S. Sanctions Additional Russian Entities

/ Global Compliance Solutions Group LLC/

On Friday, January 26, 2018, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioned an additional nine entities, and 21 individuals related to Russia and Ukraine.  In addition, OFAC identified 12 subsidiaries that are 50% or more owned by previously sanctioned Russian companies.  

The action is related to Russia's occupation of Crimea and is intended to pressure Russia to fully implement its commitments under the Minsk agreements.  U.S. Persons (1, 2) are generally prohibited from conducting transactions involving these persons (2).

"The U.S. government is committed to maintaining the sovereignty and territorial integrity of Ukraine and to targeting those who attempt to undermine the Minsk agreements," - Secretary of the Treasury Steven T. Mnuchin (3)

Summary of OFAC Actions Taken

  • Designated 11 Ukrainian separatists - Pursuant to Executive Order (EO) 13660
  • Designated 3 individuals and 4 entities (ZAO Vneshtorgservis, Gaz-Alyans OOO, Doncoaltrade Sp. ZOO and Ugolnye Tekhnologii OOO) who have supported the illicit coal trade - Pursuant to EO 13660
  • Authorized sanctions against 4 individuals and 2 entities (Evro Polis Ltd., Instar Logistics) related to the Russian government - Pursuant to EO 13661
  • Authorized sanctions against one construction entity (VAD, AO) and two associated individuals - Pursuant to EO 13685
  • Designated one individual and 2 entities (Limited Liability Company Foreign Economic Association Technopromexport, PJSC Power Machines) related to Russia's transfer of four turbines to Crimea
  • Identified 12 subsidiaries of Surgutneftegaz as being 50% or more owned by Surgutneftegaz which was added to the Sectoral Sanctions Identification list in September 2014
    • Kaliningradnefteprodukt OOO
    • Kinef OOO
    • Kirishiavtoservis OOO
    • Lengiproneftekhim OOO
    • Media-Invest OOO
    • Novgorodnefteprodukt OOO
    • Pskovnefteprodukt OOO
    • Sngb AO
    • SO Tvernefteprodukt OOO
    • Sovkhoz Chervishevski PAO
    • Strakhovove Obshchestvo Surgutneftegaz OOO
    • Surgutmebel OOO

References and Key Link(s):

U.S. Sanctions NK and Chinese entities supporting Kim Regime

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On January 24, 2018, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioned an additional nine entities, 16 individuals, and six vessels related to North Korea's violations of UN Security Council Resolutions (UNSCRs).  

The actions target actors located in North Korea, China, Russia, and Georgia.

"Treasury continues to systematically target individuals and entities financing the Kim regime and its weapons programs, including officials complicit in North Korean sanctions evasion schemes," - Secretary of the Treasury Steven T. Mnuchin (1)

Summary of OFAC Actions Taken

  • Designated 10 representatives of the Korea Ryonbong General Corporation (Ryonbong) and one Workers' Party of Korea official - Pursuant to Executive Order (EO) 13687
  • Designated 5 additional North Koreans with links to North Korean financial networks - Pursuant to EO 13810 or 13687
  • Designated Beijing Chengxing Trading Co. Ltd., Dandong Jinxiang Trade Co., Ltd., and Hana Electronics JVC - Pursuant to EO 13810
  • Designated five North Korean shipping companies (Gooryong Shipping Co Ltd, Hwasong Shipping Co Ltd, Korea Kumunsan Shipping Co, Korea Marine & Industrial Trdg, and CK International Ltd) and blocked six vessels (Goo Ryong, Hwa Song, Kum Un San, Un Ryul, Ever Glory, and UL JI Bong 6) as property of these five companies - pursuant to EO 13810
  • Sanctioned the North Korean Ministry of Crude Oil Industry

Key Link(s):

Customer Due Diligence Requirements

/ Global Compliance Solutions Group LLC/

On May 11, 2016 the Department of the Treasury, Financial Crimes Enforcement Network (FinCEN) published final rules (81 FR 29397-29458) under the Bank Secrecy Act to clarify customer due diligence requirements for Banks; brokers or dealers in securities; mutual funds; and futures commission merchants and introducing brokers in commodities. 

Unlike most other federal agencies where they've taken the approach to provide guidelines or inferred expectations around customer due diligence, these rules contain explicit customer due diligence requirements.

FinCEN makes the case that there are four core elements of customer due diligence (CDD):

  • Customer identification and verification (already a requirement)

  • Beneficial ownership identification and verification (required by the new final rule)

  • Understanding the nature and purpose of customer relationships to develop a customer risk profile (implicitly required already and will now be explicitly required by the new final rule)

  • Ongoing monitoring for reporting suspicious transactions and, on a risk-basis, maintaining and updating customer information (implicitly required already and will now be explicitly required by the new final rule)

These four core elements are also good basic guidelines for any global business, regardless of industry, with third party relationships.  Companies that fail to maintain an adequate level of oversight of their third parties risk conducting business with people and entities that do not share their same values for integrity.  This can lead to relationships that end with compliance failures that could damage the company's reputation and in some instances result in criminal/civil penalties.

A good third party due diligence program will include these basic elements:

  • Written policy with Executive level support

  • Third Party verification and screening against denied party/restricted party lists as well as for adverse media events

  • Desktop procedures that include when, what and how a third party is to be on-boarded and for how an existing third party relationship is to be monitored (for changes in their risk profile)

  • Red Flags awareness and a process for handling Red Flags as they arise

  • Prioritization of third parties by level of risk and categorization by required levels of due diligence (low, moderate, high)

  • Training    

Global Compliance Solution Group (GCSG) is well versed in assessing and implementing corporate third party due diligence programs.  If you have any questions or needs in this area please contact us directly at info@globalcompliancesg.com. 

The final rules become effective on July 11, 2016 and covered institutions must fully comply by May 11, 2018.

Key definitions:

  • Third Party - means customers or intermediaries that conduct business on a company's behalf with persons outside of the company and encompasses those contracted in both sales and supply channels.

  • Intermediaries - may include joint venture partners, consortium partners, agents, advisor (e.g. legal, tax, financial, consultant, lobbyist), supplier, vendor, service provider (e.g. communications, logistics, storage, brokers, forwarders, etc.) or distributor/reseller. 

Key link(s):

Treasury Publishes List of Countries Requiring Cooperation with a Boycott

/ Global Compliance Solutions Group LLC/

On April 8, 2016, the Department of Treasury published (81 FR 20720) the current list of countries requiring cooperation with an international boycott.  Treasury identified the following countries as requiring or that may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code
of 1986):

  • Iraq
  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen