Tag Archives: Christopher D. Frey

OFAC Enforcement Action Against U.S. Payments Company Shows the Importance of Robust Sanctioned Person and Location Screening

by Jessica S. Carey, Christopher D. Frey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Richard S. Elliott, Rachel Fiorill, and Joshua R. Thompson

On July 23, 2021, the U.S. Department of the Treasury’s Office of Assets Control (“OFAC”) announced a $1,400,301 settlement agreement with a New York-based online money transmitter and provider of prepaid access, Payoneer Inc. (“Payoneer”), to resolve 2,260 apparent violations of multiple OFAC sanctions programs.[1] OFAC determined that Payoneer’s sanctions compliance program—in particular its sanctioned person and location screening procedures—had several deficiencies that allowed persons located in sanctioned jurisdictions and persons on OFAC’s Specially Designation Nationals and Blocked Persons List (the “SDN List”) to engage in approximately $802,117 worth of transactions via Payoneer’s services. Continue reading →

Update on Communist Chinese Military Companies (CCMCs) Sanctions (Part II of II)

by H. Christopher Boehning, Jessica S. Carey, Christopher D. Frey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Xiaoyu Greg Liu, Richard S. Elliott, Rachel M. Fiorill, and Karen R. King

In response to the Trump administration’s CCMC sanctions (discussed in Part I of this post), the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has released additional guidance and its first two general licenses. The U.S. Department of Commerce also responded to the sanctions; it published on December 21, 2020 the first ever Military End User List pursuant to the Export Administration Regulations as well as a warning that exports to CCMCs will raise red flags and require due diligence. Continue reading →

Update on Communist Chinese Military Companies (CCMCs) Sanctions (Part I of II)

On November 12, 2020, President Trump issued an Executive Order titled “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies” (the “Order”), which went into effect on January 11, 2021 (after a 60-day grace period).[1] The Order prohibits U.S. persons[2] from engaging in transactions in publicly traded securities (or any securities that are derivative or otherwise designed to provide investment exposure to such publicly traded securities) of any identified “Communist Chinese Military Companies” (“CCMCs”). In the Order, President Trump cited the national security threat posed by the People’s Republic of China’s (the “PRC”) national strategy of Military-Civil Fusion, and, specifically, the threat posed by PRC companies that sell securities to U.S. investors and then invest this capital to finance the development and modernization of the Chinese military. Continue reading →

United States Imposes Sanctions on Turkey under CAATSA Section 231 for Purchase of Russian Missile System

by H. Christopher Boehning, Jessica S. Carey, Christopher D. Frey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Mark F. Mendelsohn, Richard S. Elliott, Rachel Fiorill, Karen R. King, and Maria E. Eliot

On December 14, 2020, the U.S. imposed sanctions on the Republic of Turkey’s Presidency of Defense Industries (“SSB”) pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), which mandates the imposition of sanctions against non-U.S. persons who conduct “significant” transactions with Russia’s defense or intelligence sectors.[1] The U.S. State Department determined that SSB’s acquisition of a Russian S-400 surface-to-air missile from Rosoboronexport (“ROE”) qualified as a significant transaction under Section 231. Continue reading →

OFAC Cites the Use of U.S.-Origin Software and U.S. Network Infrastructure in Reaching a Nearly $8 Million Settlement with a Swiss Commercial Aviation Services Company

by H. Christopher Boehning, Jessica S. Carey, Christopher D. Frey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Rachel M. Fiorill, Karen R. King and Jacob A. Braly

On February 26, 2020, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) announced a $7,829,640 settlement agreement with Geneva-based Société Internationale de Télécommunications Aéronautiques SCRL (“SITA”), to settle its potential civil liability for 9,256 apparent violations of the Global Terrorism Sanctions Regulations (“GTSR”).[1] The case involved the alleged provision of commercial services and software subject to U.S. jurisdiction for the benefit of certain airline customers designated by OFAC as specially designated global terrorists (“SDGTs”) between April 2013 and February 2018.[2] Continue reading →

FinCEN Imposes Its First Penalty on a Bank Compliance Officer for $450,000 for Failing to Prevent AML Violations

On March 4, 2020, the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued a consent order assessing a $450,000 civil money penalty against Michael LaFontaine, a former Chief Operational Risk Officer at U.S. Bank NA (“U.S. Bank”), for his alleged failure to prevent Bank Secrecy Act/anti-money laundering (“BSA/AML”) violations that took place during his tenure.[1] This action—which follows U.S. Bank’s 2018 BSA/AML-related resolution with FinCEN, the U.S. Department of Justice (“DOJ”), the Office of the Comptroller of the Currency (“OCC”) and the Federal Reserve for a combined $613 million in financial penalties—marks the first time FinCEN has imposed a penalty on a bank compliance officer for his role in failing to prevent BSA/AML compliance program failures.[2] Continue reading →

DOJ Announces Revised Export Control and Sanctions Enforcement Policy for Companies, Including Financial Institutions

by H. Christopher Boehning, Jessica S. Carey, Christopher D. Frey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Mark F. Mendelsohn, Richard S. Elliott, Karen R. King, and Anand Sithian

On December 13, the U.S. Department of Justice’s (“DOJ”) National Security Division (“NSD”) announced a new policy designed to encourage business organizations to make voluntary self-disclosures (“VSDs”) to the DOJ in connection with potentially willful export control and economic sanctions violations (the “Revised VSD Policy”).[1] The policy, which only applies to voluntary self-disclosures to NSD’s Counterintelligence and Export Control Section (“CES”), revises a 2016 DOJ policy on the same topic. As the policy notes, in the export control and sanctions context, criminal violations require proof of willfulness, defined as knowledge that the conduct violated the law.[2] Continue reading →

VinDAX Is the Seventh Cryptocurrency Exchange Hacked This Year: What Should Investors Be Considering?

by Mark S. Bergman, Roberto Finzi, Christopher D. Frey, Manuel S. Frey, David S. Huntington, Jeannie S. Rhee, Raphael M. Russo, Jonathan H. Ashtor, Steven C. Herzog, Daniel J. Klein, and Apeksha S. Vora

On November 5, 2019, Vietnam-based cryptocurrency exchange VinDAX was hacked, losing half a million U.S. dollars’ worth of funds spread across 23 different cryptocurrencies.[1] The VinDAX hack marks the latest in a series of cryptocurrency exchange hacks and data breaches that have taken place this year, and is part of a larger and growing trend of digital currency heists that have occurred since Bitcoin, the first cryptocurrency, was introduced in 2008.[2] In July of this year, Japan-based cryptocurrency exchange Bitpoint was also hacked, losing about $32 million in cryptocurrency,[3] and earlier this year, hackers stole $16 million worth of cryptocurrency from New Zealand-based Cryptopia.[4] Losses from cryptocurrency hacks this year alone are reported to have totaled around $1.39 billion worth of assets.[5] Continue reading →

Social Media Bot Company Devumi LLC Reaches $2.5 Million Settlement with FTC for Sale of Misleading Social Media “Influence Indicators”

by Christopher D. Frey, Roberto J. Gonzalez, Jeh Charles Johnson, Jonathan S. Kanter, Claudine Meredith-Goujon, Lorin L. Reisner, Jeannie S. Rhee, Richard C. Tarlowe, Alessandra Baniel-Stark, Daniel J. Klein, and Taylor C. Williams.

Background

On October 21, 2019, the Federal Trade Commission (“FTC”) settled its first-ever complaint against a company for selling fake indicators of social media influence such as phony likes, follows, views, and subscribers to users on Twitter, LinkedIn, YouTube, Pinterest, Vine, and SoundCloud.[1] The company, Devumi LLC (“Devumi”), and its CEO, German Calas, Jr., settled the enforcement action with a $2.5 million fine.[2] The company was dissolved in 2018.[3] Reporting suggested that Devumi maintained an estimated stock of at least 3.5 million automated accounts, thousands of which used personal details of real social media users (who had not engaged Devumi’s clients with follows, likes, etc.), and that these accounts were used to generate the false indicators of social media influence.[4]

The FTC found, for example, that Devumi filled more than 58,000 orders for fake Twitter followers from a diverse set of buyers, including actors, athletes, musicians, investment professionals, lawyers, and experts who wanted to increase their appeal as influencers or otherwise boost their credibility.[5] Devumi filled over 800 orders for fake LinkedIn followers to marketing and public relations firms, consulting firms, and financial services companies, among others.[6] Continue reading →

OFAC Takes Enforcement Action Against U.S. Parent Company for its Recently Acquired Chinese Subsidiary’s Iran Sanctions Violations

by Brad S. Karp, H. Christopher Boehning, Jessica S. Carey, Christopher D. Frey, Michael E. Gertzman, Roberto J. Gonzalez, Richard S. Elliott, Rachel M. Fiorill, Karen R. King, Joshua R. Thompson

Enforcement Action Shows the Importance of Pre-Acquisition Sanctions Due Diligence and Post-Acquisition Sanctions Compliance Enhancements

On March 27, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced a $1,869,144 settlement agreement with Connecticut-based Stanley Black & Decker, Inc. (“Stanley Black & Decker”), a manufacturer of industrial tools and household hardware, regarding 23 apparent violations of OFAC’s Iran sanctions regulations.[1] OFAC determined that Stanley Black & Decker’s Chinese subsidiary, Jiangsu Guoqiang Tools Co. Ltd. (“GQ”), knowingly provided power tools and spare parts to Iranian end-users.[2] According to OFAC, GQ’s shipments were made via third-party intermediaries, located in the United Arab Emirates and China, with the knowledge that the products were ultimately destined for Iran.[3] Under U.S. law, non-U.S. companies owned or controlled by U.S. companies are required to adhere to Iran sanctions as if they were U.S. persons. The settlement, along with the Kollmorgen Corporation (“Kollmorgen”) settlement in February 2019, signals the Trump Administration’s willingness to hold U.S. parent companies liable for their subsidiaries’ Iran sanctions violations, which is an area that, prior to this year, had seen little enforcement activity to date. Continue reading →

Compliance and Enforcement