As any BSA Officer can attest, maintaining effective controls in an Office of Foreign Assets Control (OFAC) program can be cumbersome in the best of times. And, managing that program in the midst of a crisis, where new sanctions are issued frequently, can be particularly difficult.
As our industry is aware, the Russian Federation’s invasion of Ukraine has been met with the imposition of unprecedented economic actions from the United States and others. Managing those sanctions and maintaining diligence in supporting those efforts is paramount.
OFAC updates their website regularly. In addition to providing links to SDN and other sanctions lists, they also provide a quick link to “OFAC Recent Actions,” which interested parties may find helpful. It may be found here.
In connection with these sanctions, FinCEN issued an Alert (FIN-2022-Alert001) earlier this month entitled, “FinCEN Advises Increased Vigilance for Potential Russian Sanctions Evasion Attempts.” This important Alert references the pressures imposed on Russia and Belarus, and alerts the industry to possible activities to evade those sanctions.
Besides highlighting recent U.S. Department of Treasury actions in response to the Ukraine invasion, the Alert also emphasizes that attempts to evade these sanctions may come in a variety of forms. Red flag indicators include, but are not limited to, the following:
- Use of corporate vehicles (i.e. legal entities, such as shell companies, and legal arrangements) to obscure (i) ownership, (ii) source of funds, or (iii) countries involved, particularly sanctioned jurisdictions.
- Use of shell companies to conduct international wire transfers, often involving financial institutions in jurisdictions distinct from company registration.
- Use of third parties to shield the identity of sanctioned persons and/or PEPs seeking to hide the origin or ownership of funds, for example, to hide the purchase or sale of real estate.
The Alert also provides helpful information, and other red flag indicators, related to:
- sanctions evasion attempts using convertible virtual currency (CVC), and
- possible ransomware attacks and other cybercrime.
BSA Staff should review the Alert in its entirety, which also addresses SAR filing, SAR instructions, and other relevant BSA requirements. FinCEN’s Alert may be found here.