The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury recently published sanctions compliance guidance for the virtual currency industry (the Guidance). The move was long anticipated, given the rapid industry growth and limited regulator guidance in this space. The Guidance provides an overview of OFAC sanctions requirements and procedures, including licensing and enforcement processes, and highlights sanctions compliance best practices tailored for the virtual currency industry, which includes technology companies, exchangers, administrators, miners, wallet providers, and users.
The Treasury 2021 Sanctions Review is Complete: What Next?
On October 18, 2021, the U.S. Department of the Treasury (“Treasury”) released the findings from its review of the economic sanctions administered and enforced by its Office of Foreign Assets Control (“OFAC”). During the review, Treasury met with individuals representing hundreds of sanctions stakeholders, including Members of Congress and their staffs, the private sector, foreign governments, and Treasury’s sanctions workforce. The review—headed by Deputy Secretary of the Treasury Wally Adeyemo—focused on two primary issues: (1) the framework guiding the imposition of U.S. sanctions; and (2) potential operational, structural, and procedural changes to improve Treasury’s ability to use sanctions now and in the future. The report and its recommendations aim to preserve the efficacy of U.S. sanctions in confronting perceived foreign policy and national security threats to the U.S. by “modernizing” their implementation through:
- Adoption of a structured policy framework that links sanctions to a clear policy objective;
- Multilateral coordination wherever possible;
- Calibration of sanctions to mitigate unintended economic, political, and humanitarian impact;
- Ensuring sanctions are easily understood, enforceable, and, where possible, reversible; and
- Investment in modernizing Treasury’s sanctions technology, workforce, and infrastructure.
UAE’s New Executive Office of AML/CFT and Dubai’s New Specialized Money Laundering Court
On August 22, 2021, at the directive of His Highness Sheikh Mohammed bin Rashid al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, Dubai Courts announced the establishment of a specialized new court that will focus on combating money laundering. The announcement comes just months after the UAE Cabinet approved the establishment of the Executive Office of Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT).
These two developments together further demonstrate the UAE’s ongoing efforts to implement and maintain a sophisticated financial crime compliance framework that is in line with FATF’s expectations and recommendations.
OFAC Issues Updated Ransomware Advisory and Designates Virtual Currency Exchange
On September 21, 2021, the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued an Updated Advisory on Potential Sanctions Risks for Facilitating Ransomware Payments (the “Updated Advisory”) superseding its earlier October 1, 2020 guidance on ransomware attacks and, for the first time, added a virtual currency exchange to the Specially Designated Nationals and Blocked Persons List (“SDN List”).[1] In response to the increase in ransomware demands and payments during the COVID-19 pandemic, the U.S. Government has embarked on a “whole of government effort to counter ransomware.”[2] The Updated Advisory and SDN designation of SUEX OTC, S.R.O. (“SUEX”) are the Treasury Department’s most recent actions on this front. They are intended to highlight the sanctions risks associated with ransomware payments and the proactive steps companies can take to mitigate such risks.[3]
New Central Bank Guidance for UAE Financial Institutions on Suspicious Activity/Transaction Reporting
On June 7, 2021, the UAE Central Bank issued new guidance requiring all UAE financial institutions to file suspicious activity reports (SARs) or suspicious transaction reports (STRs) with the UAE’s Financial Intelligence Unit (FIU) using the goAML portal within 35 calendar days of detection of any conduct that they reasonably suspect may be linked to money laundering, terror financing, or other criminal activity. By the end of the first 20 calendar days, a case investigator must have analyzed the alert or other indicator of suspicion, conducted any further investigation that may be necessary, and made an internal recommendation to the MLRO as to whether an SAR/STR filing is warranted. Also within those first 20 calendar days, the MLRO must have reviewed the case report, considered the recommendation, and finally dispositioned the alert or activity one way or the other. By the end of a further 15 calendar days, the MLRO must have filed an SAR/STR with the FIU in respect of anything determined to be suspicious. Note that these are maximum timeframes and UAE financial institutions are ultimately responsible under the local AML/CFT Law to report suspicious activity “without delay.”
Our new client alert summarizes the Central Bank’s new expectations around timely alert dispositioning and SAR/STR filings. Importantly, we also examine important guidance from the Central Bank regarding best practices for drafting SARs/STRs and recommended post-SAR/STR filing processes. Additionally, we cover the Central Bank’s warning to UAE financial institutions not to engage in defensive filings and, finally, we examine common typologies and red flag indicators of money laundering or terror financing in the UAE, as identified by the FIU.
Anti-Money Laundering Act Update: Six Months In
The National Defense Authorization Act for Fiscal Year 2021 (“NDAA”) became law earlier this year, after a congressional override of then-President Trump’s veto. Division F of the NDAA consists of the Anti-Money Laundering Act of 2020 (“AMLA”). The AMLA expands numerous Bank Secrecy Act (“BSA”) requirements, and FinCEN has been active in the first sixth months of the AMLA’s passage in issuing guidance, reports, and proposed regulations.
Preparing an application for the SBA’s Community Navigator Program, from a compliance perspective
The American Rescue Plan Act allocated $100 million to the Small Business Administration to be distributed to various “Hub” organizations to further disseminate among their “Spoke” partners. The purpose behind this funding structure is to better reach small businesses in underserved communities, which may not have received the full benefit of COVID-19-related economic relief in earlier legislation. To accomplish this goal, the SBA is launching the Community Navigator Program to partner with community organizations with stronger ties and relationships to such businesses. These community organizations— “Hubs”—will coordinate the activities of the Program and provide assistance to their partners—“Spokes”—which will in turn provide services to their respective communities. Isabella Casillas Guzman, the SBA administrator, explained this model in greater detail by stating that “we’ll be using a hub and spoke model in local regions across the nation to bridge the gap between local entrepreneurs and SBA’s resources and programs. If we’re going to build back better, we need to ensure that all entrepreneurs have the support they need to recover.”
The SBA recently extended the application deadline for the Community Navigator Pilot Program to July 23, 2021. See link. Given the current robust regulatory environment, Hubs should use this extra time to ensure that their applications reflect their commitment and ability to comply with the terms and conditions of the award and applicable laws and regulations. Continue Reading
The Kingdom of Saudi Arabia approves new Anti-Financial Fraud and Deceit Law
On April 30, 2021, Ministers in Saudi Arabia approved a new law, due to come into force in September of this year, which is designed to enhance the Kingdom’s efforts to combat financial crime.
Beware: The Report Expressly Prepared for Trial Counsel May Not Be Privileged After All
In this article for the Consumer Privacy World Blog, John Burlingame and Kristin Bryan discuss a recent federal district court decision which calls into question the application of attorney work-product privilege to work-product prepared by consultants in anticipation of litigation.
FinCEN and Federal Reserve Seek Comments on Proposed Amendments to the Recordkeeping and Travel Rules
On October 23, 2020, the Board of Governors of the Federal Reserve System (the ‘‘Board’’) and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) (collectively, the “Agencies”) issued a joint Notice of Proposed Rulemaking (“NPRM”) soliciting public comment on questions relating to potential amendments to Bank Secrecy Act (“BSA”) regulations. The proposed amendments seek to modify the existing Recordkeeping Rule and Travel Rule by:
- Lowering the requirement to collect, retain, and transmit information on funds transfers and transmittals of funds from $3,000 to $250 for transactions that begin or end outside the United States; and
- Superseding the existing definition of money to include convertible virtual currencies (“CVCs”).
