Category Archives: FDIC

July 27, 2015

Week in Review and Look Ahead

by Jeremy Paner

The U.S. Department of the Treasury was quite active last week in its efforts to tighten sanctions against the Lebanese-based terrorist group Hizballah and the rogue state of North Korea, combat money laundering used to hide terrorism and narcotics finance, and enforce economic sanctions against proliferators of weapons of mass destruction (WMD). The Office of Foreign Assets Control (OFAC), the Financial Crimes Enforcement Network (FinCEN), and the Federal Deposit Insurance Corporation (FDIC) all took action to safeguard the U.S. financial system. Once again, it is apparent that Treasury continues to concentrate and coordinate its actions on Hizballah.

Last week also signaled a recent significant shift at FinCEN that will result in a drastic increase in its 311 actions. Businesses that rely on foreign banks – especially those in Central and South America and the Middle East – should be on notice that they are now much more likely to be cut off from the U.S. financial system.

The Office of Foreign Assets Control  

On July 21, OFAC designated four individuals for their roles in Hizballah’s support of the Assad regime. Three of the individuals were designated pursuant to Executive Order (EO) 13582 for providing high-level military support to the Assad regime in Syria. OFAC designated the fourth designee pursuant to EO 13224 (the counterterrorism authority). In its press release announcing the designations, Treasury describes this person as “Hizballah’s point person for the procurement and transshipment of weapons for the group and its Syrian partners for at least 15 years.”

On July 23, OFAC designated Singapore-based Sanat Shipping Company and its President for providing material support to a shipping company previously designated by the United Nations and OFAC for smuggling arms into North Korea. OFAC made these designations pursuant to EO 13551, which blocks those that send weapons to North Korea. In addition to adding these new listings, OFAC updated the List of Specially Designated Nationals (SDN List) with new aliases used to evade sanctions against a designated North Korean weapons shipper and bank officials.

OFAC announced on July 24 that it reached an agreement with Great Plains Stains (GPS) Co. to settle apparent violations of sanctions imposed against a designated proliferator of WMD. According to the announcement, GPS agreed to pay $214,000 to settle violations arising from its use of a blocked vessel to transport goods from Shanghai to Dubai. Interestingly, OFAC concluded that the violations were non-egregious, irrespective of its finding that GPS willfully stripped references to the blocked vessel from the trade documents and did not follow explicit instructions OFAC provided about the same. The non-egregious determination was probably a result GPS’s inability to pay the $250,000 maximum base penalty per violation which results from egregious violations of WMD-related sanctions that are not self-disclosed to OFAC.

Financial Crimes Enforcement Network

On July 23, FinCEN issued a Final Rule (31 C.F.R. 1010.658) pursuant to Section 311 of the USA PATRIOT Act, imposing “special measure five” against FBME Bank Ltd. (FBME). Although it is a subsidiary of the Federal Bank of Lebanon, a private Lebanese bank, FBME is headquartered in Tanzania and holds the vast majority of its assets in Cyprus. FBME is owned by the same two individuals that own the Federal Bank of Lebanon. FinCEN explains in its Final Rule that FBME has deposited hundreds of thousands of dollars from a Hizballah financier and has an extensive customer base of shell companies. Although FinCEN provides a multitude of bases for the 311 action,  this Hizballah connection clearly led to the bank’s formal severance from the U.S. financial system.

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