Financial Crime World

Title: OFAC Imposes New Sanctions on Russian Financial Institutions: A Wake-Up Call for Global Financial Sector

New Executive Order Expands OFAC’s Sanctioning Authority

  • December 22, 2023: President Joe Biden issued Executive Order 14114, granting OFAC the power to target foreign financial institutions (FFIs) dealing with Russia’s military-industrial complex.
  • Amended executive orders: The order amends previous orders, expanding the scope of economic sanctions against Russia.

OFAC’s Broadened Sanctioning Authority

Sanctions on FFIs: OFAC can now sanction FFIs involved in transactions related to Russia’s tech, defense, and material industries or military-industrial base.

Additional export-related sanctions: Treasury Secretary, in consultation with State and Commerce Departments, can impose sanctions on FFIs exporting specific items to Russia.

List of designated products: These items include advanced manufacturing equipment, semiconductor materials, and high-tech communication components.

OFAC’s Sanctions Advisory

  • Simultaneous release: OFAC released a sanctions advisory, guiding FFIs on sanctions risks, mitigation measures, and compliance obligations.
  • Managing sanctions risks: OFAC highlights the importance of FFIs identifying and managing potential risks related to Russia’s military-industrial base.

Record-breaking Binance Settlement

  • Historic penalties: Financial Crimes Enforcement Network (FinCEN) announced significant penalties against Binance Holdings Ltd., its affiliates, and their CEO for AML and sanctions violations.
  • Costly consequences: The $3.4 billion civil penalty, five-year monitorship, exit from the U.S. market, and criminal guilty plea serve as a powerful reminder of the importance of robust compliance programs.

US Regulatory Agencies’ Collaborative Efforts

  • Strengthening collaboration: The collaboration between US regulatory agencies like FinCEN, Treasury, Justice Department, and OFAC is expected to intensify.
  • Compliance for financial institutions: Financial institutions should maintain comprehensive compliance programs to mitigate risks and avoid regulatory scrutiny and reputational damage.

Consequences of Noncompliance

  • OFAC’s strict sanctions: OFAC sanctions against FFIs can include prohibition of correspondent accounts in the U.S. and asset freezes (blocking sanctions).
  • Significant regulatory response: The expanding role of OFAC and the record-breaking Binance settlement demonstrate that noncompliance with US economic sanctions and export control regulations comes with serious consequences.