Recent Developments in BSA/AML and Sanctions: New Sanctions Targeting Persons in Venezuela and Expansion of Sanctions Addressing the Situation in Ukraine; DOJ Reaches First Criminal Settlement in “Operation Choke Point”; and FinCEN Proposes Special Measures Against an Andorran Bank Under Section 311 of the USA PATRIOT Act

Sullivan & Cromwell LLP - March 18, 2015

Last week, there were several important developments in the areas of U.S. Bank Secrecy Act/anti-money laundering (“BSA/AML”) and U.S. economic sanctions.  On Monday, March 9, 2015, the President issued Executive Order 13692, implementing, for the first time, sanctions under the Venezuela Defense of Human Rights and Civil Society Act of 2014.  On Wednesday, March 11, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced the expansion of the list of parties targeted by the Ukraine/Russia-related economic sanctions, following similar actions taken by the European Union and Canada in February, including the targeting of a party for operating in the Crimea region of Ukraine for the first time under the authority of Executive Order 13685.

On Tuesday, March 10, 2015, the U.S. Department of Justice (“DOJ”) announced its first criminal settlement related to “Operation Choke Point”—an enforcement initiative targeting banks and payment processors that provide services to merchants in high risk industries.  This criminal settlement appears to reflect a marked increase in the potential severity of sanctions stemming from misconduct uncovered through that initiative. On that same day, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) named Banca Privada d’Andorrà (“BPA”) as a foreign financial institution of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act and issued a notice of proposed rulemaking (“Proposed Rule”) with regard to the imposition of special measures against BPA.  If the Proposed Rule is adopted, covered U.S. financial institutions would be prohibited from maintaining correspondent accounts for BPA and would be required to apply special due diligence to correspondent accounts held for other foreign banks to guard against the processing of any transactions involving BPA or any of its branches, offices and subsidiaries.  Treasury’s finding of primary money laundering concern, however, is effective immediately.
In addition, on Thursday, March 12, Commerzbank AG agreed to a $1.45 billion settlement with the DOJ, OFAC and the Board of Governors of the Federal Reserve System for sanctions and BSA violations.  The Commerzbank matter will be the subject of a separate memorandum to clients.