New US Sanctions on Iran's Iron, Steel, Aluminum, and Copper Sectors

On May 8, 2019, the Trump administration issued an Executive Order (EO)(1) establishing new sanctions on Iran’s iron, steel, aluminum, and copper sectors. A few key points from the EO include, but are not limited to, the following:

  • “All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person(2) of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in: any person determined by the Secretary of the Treasury, in consultation with the Secretary of State”:

    • to be operating in the iron, steel, aluminum, or copper sector of Iran, or to be a person that owns, controls, or operates an entity that is part of the iron, steel, aluminum, or copper sector of Iran;

    • to have knowingly engaged, on or after the date of this order, in a significant transaction for the sale, supply, or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminum, or copper sectors of Iran;

    • to have knowingly engaged, on or after the date of this order, in a significant transaction for the purchase, acquisition, sale, transport, or marketing of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products from Iran;….

In addition to the above, there are additional prohibitions on financial institutions and financial transactions (occurring with the noted sectors). The prohibitions included in the EO include:

  • the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked; and

  • the receipt of any contribution or provision of funds, goods, or services from any such person.

Contact your GCSG Trade Compliance professionals for assistance in understanding how to reduce your risk and how this EO may affect your business.

References

(1) Executive Order (EO) on “Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran” - May 8, 2019

(2) United States person - means any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.(1)

(3) Knowingly - with respect to conduct, a circumstance, or a result, means that a person has actual knowledge, or should have known, of the conduct, the circumstance, or the result.(1)

(4) Entity - means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization.(1)

Network of Iranian front companies disrupted by OFAC

On March 26, 2019 the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced(1) it had taken action against a network of 25 individuals and entities that had transferred over a billion dollars to the Islamic Revolutionary Guard Corps (IRGC) and Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL).

The evasion scheme included a layered network of front companies and agents based in Iran, UAE, and Turkey that were set up to evade international sanctions and to gain access to the international financial system. The network exchanged devalued Iranian rials for dollars and euros.

We are targeting a vast network of front companies and individuals located in Iran, Turkey, and the UAE to disrupt a scheme the Iranian regime has used to illicitly move more than a billion dollars in fundsCentral to this network and sanctioned today pursuant to our counter terrorism authority is Iran's IRGC-controlled Ansar Bank and its currency exchange arm, Ansar Exchange, both of which used layers of intermediary entities to exchange devalued Iranian rial ultimately for dollars and euros to line the pockets of the IRGC and MODAFL…” (1)

Five front companies- UAE-based Sakan General Trading, Lebra Moon General Trading, and Naria General Trading, and Turkey-based Atlas Doviz, and the Iran-based Hital Exchange provided $800 million in funds to Ansar exchange.

Now more than ever, it is vitally important that global companies implement third-party due diligence and engagement policies. These policies are often risk-based but should be comprehensive and include at a minimum background investigation diligence and ongoing monitoring of distribution networks and contract agents.

Contact our Due Diligence compliance professionals at GCSG today to learn how we can help you mitigate your third-party risk with our due diligence reports, risk-ranking tool, policy development and implementation support, and international boots-on-the-ground third-party Audits.

References

(1) U.S. Department of the Treasury Press Releases - “United States Disrupts Large Scale Front Company Network Transferring Hundreds of Millions of Dollars and Euros to the IRGC and Iran’s Ministry of Defense.” - March 26, 2019

Freight forwarding and logistics firms to withdraw from business with Iran

According to Lloyd's Loading List, some logistics service providers have decided to halt business in Iran as a result of the re-imposition of US sanctions.  Others are taking a wait and see approach.  In addition, several major container lines such as CMA, CGM, Maersk, and MSC have withdrawn from Iran.(2)  

"Thomas Cullen, a senior analyst at logistics consulting firm Transport Intelligence, said the re-imposition of US sanctions “seems likely to be at least as brutal as the sanctions pursued for the decade prior to the JCPOA, with the US now pressing for Iran to be excluded from the SWIFT banking transaction system”."(1)

Cullen noted: “With the announcement last week that Renault was ceasing operations, something that Peugeot-Citroen decided last month, the CKD related container traffic will fall heavily. Possibly the Chinese VMs may increase inputs to compensate, but they are much weaker in this market.”(1)

Cullen added: “The leading western container lines have effectively withdrawn from services into Iran, presumably leaving shippers to arrange their own feeder services from Dubai. Once again, the Chinese carriers may be the only option.”(1)

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OFAC Issues Global Magnitsky Sanctions Regulations

On June 29, 2018 the Department of the Treasury's Office of Foreign Assets Control (OFAC) published a final rule (83 FR 30541-30548) that implements the Global Magnitsky Human Rights Accountability Act (the "Act") and Presidential Executive Order 13818 (the "EO").  

The Act authorizes the US President to impose sanctions on any foreign person determined to be responsible for extrajudicial killings, torture, or other gross violations of human rights, or a government official that is responsible for, complicit in, ordering, controlling, or otherwise directing acts of significant corruption.  The EO declared a national emergency to deal with the threat of serious human rights abuse and corruption around the world.  

The published regulations prohibit all transactions previously prohibited under the EO.

The rule is effective as of June 29, 2018.

Contact the experts at GCSG for more information.

E info@globalcompliancesg.com

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U.S. Sanctions NK and Chinese entities supporting Kim Regime

On January 24, 2018, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioned an additional nine entities, 16 individuals, and six vessels related to North Korea's violations of UN Security Council Resolutions (UNSCRs).  

The actions target actors located in North Korea, China, Russia, and Georgia.

"Treasury continues to systematically target individuals and entities financing the Kim regime and its weapons programs, including officials complicit in North Korean sanctions evasion schemes," - Secretary of the Treasury Steven T. Mnuchin (1)

Summary of OFAC Actions Taken

  • Designated 10 representatives of the Korea Ryonbong General Corporation (Ryonbong) and one Workers' Party of Korea official - Pursuant to Executive Order (EO) 13687
  • Designated 5 additional North Koreans with links to North Korean financial networks - Pursuant to EO 13810 or 13687
  • Designated Beijing Chengxing Trading Co. Ltd., Dandong Jinxiang Trade Co., Ltd., and Hana Electronics JVC - Pursuant to EO 13810
  • Designated five North Korean shipping companies (Gooryong Shipping Co Ltd, Hwasong Shipping Co Ltd, Korea Kumunsan Shipping Co, Korea Marine & Industrial Trdg, and CK International Ltd) and blocked six vessels (Goo Ryong, Hwa Song, Kum Un San, Un Ryul, Ever Glory, and UL JI Bong 6) as property of these five companies - pursuant to EO 13810
  • Sanctioned the North Korean Ministry of Crude Oil Industry

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Monday Compliance News - Around the World

GCSG's Monday Compliance News (published Tuesday the week of Jan 22) is a compilation of some of the previous weeks interesting trade compliance, anti-bribery/corruption, fraud, and due diligence news bites, from around the world.

The Impact of Retroactive Transfer Pricing Adjustments on the EU Customs Valuation | KPMG Meijburg & Co

"With its judgment of December 20, 2017 in the Hamamatsu Photonics Deutschland case, the Court of Justice of the European Union finally provided some clarity about the impact of retroactive transfer pricing adjustments...." (Click here for the article) - European Union

UK companies will face huge new VAT burden after Brexit | The Guardian

"More than 130,000 UK firms will be forced to pay VAT upfront for the first time on all goods imported from the European Union after Brexit...." (Click here for the article) - UK, European Union

Ban Ki-Moon's Nephew Pleads Guilty in Bribery Case | The Wall Street Journal

"Joo Hyun Bahn, the nephew of former United Nations Secretary-General Ban Ki-Moon, pleaded guilty on Friday to U.S. charges connected to a scheme to bribe a foreign official...." (Click here for the article) - Vietnam, U.S., Global

Canada takes the U.S. to WTO in wide-ranging trade complaint | The Globe and Mail

"The Canadian government is taking the United States to the world's trade court in a wide-ranging complaint that accuses Washington of flouting the rules of commerce." (Click here for the article) - Canada, U.S.

Deferred prosecution agreements proposed to take companies task | The Straits Times

"A new legal framework that can grant companies amnesty for certain corporate offences is being proposed in Singapore." (Click here for the article) - Singapore

Cigarettes and Murky Joint Ventures Help North Korea Evade Crackdown  | The Wall Street Journal

"Global businesses faced a deadline last week to exit joint ventures operating in North Korea, but dozens of them are still there." (Click here for the article) - North Korea, U.S., South Korea, China, Global

US Company Settles Whistleblower Lawsuit, Pays for Importer's Customs Fraud  | Global Trade Magazine

"Federal prosecutors in New York recently announced the settlement of a remarkable lawsuit relating to a scheme to evade import duties." (Click here for the article) - U.S.

SFO opens investigation into Chemring Group PLC and its subsidiary  | U.K. Serious Fraud Office News Release

"The SFO confirms it has opened a criminal investigation into bribery, corruption and money laundering arising from the conduct of business by Chemring Group plc and CTSL..." (Click here for the article) - U.K.

Monday Compliance News - Around the World

GCSG's Monday Compliance News is a compilation of some of the previous weeks interesting trade compliance, anti-bribery/corruption, fraud, and due diligence news bites, from around the world.

With GDPR looming, key compliance questions still remain | DIGIDAY

"For better or worse, preparing for the General Data Protection Regulation is a do-it-yourself exercise for advertisers in the absence of stronger direction from regulators." (Click here for the article) - European Union

Turkish banker guilty of helping Iran dodge US sanctions  | Reuters TV

WATCH: US jury finds Turkish banker guilty of helping Iran dodge US sanctions (Click here for the video) - Iran, Turkey, United States

Firms can choose not to enter corruption-ridden markets | The Straits Times

"Many well-established multinationals have decent corporate cultures.  Their top managements have been known to decide that if a country operates by practices in keeping with the company ethos, they would not do business in that country." (Click here for the article) - Singapore

Drug Company Allegedly Bribed Doctors to Sell its Powerful Opioid Spray | Gizmodo

"The State of North Carolina is suing a pharmaceutical manufacturer for allegedly bribing doctors and defrauding insurers in order to sell more of its powerful fentanyl spray, fanning the flames of the opioid crisis that has millions addicted and is shortening lifespans." (Click here for the article) - United States

PWC faces negligence claim over $2bn fraud at Colonial Bank | The Times

"Auditors at PWC were negligent and missed a 'Red Flag' over a huge fraud that contributed to the collapse of a bank during the financial crisis, an American court has found." (Click here for the article) - Global

Japan Imposes Additional Unilateral Sanctions on North Korea

On Friday, December 15, 2017 Japan imposed additional unilateral sanctions against 19 North Korean entities.  This includes companies involved in the financial services, coal, and oil trading sectors.

With the additional 19 entities, the total number of North Korean entities under Japanese sanctions now stands at 56.

(1) "According to a Foreign Ministry official, all the companies are already subject to U.S. sanctions, starting from January last year." 

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UK Introduces Sanctions Bill

On October 18, 2017 the UK "Sanctions and Anti-Money Laundering Bill" (the "Bill") was introduced in the upper house of the Parliament of the UK.  The UK government news release stated the Bill "ensures that when the UK leaves the EU, we can continue to impose, update, and lift sanctions and AML regimes." (1)

Most of the sanctions regimes the UK is currently complying with had their powers established in the European Communities Act of 1972.  Once the UK fully withdraws from the European Union, the Bill will establish necessary legal authority in order to continue to work with their international partners and effectively enforce sanctions regimes and money laundering regulations. 

"This will enable us to impose sanctions as appropriate either alone or with partners in the EU and around the world, to take targeted action against countries, organizations and individuals who contravene international law, commit or finance terrorism or threaten international peace and security." (2) - Alan Duncan, Minister for Europe.

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Sudan Sanctions Revoked

     On January 13, 2017 the US President issued Executive Order (E.O.) 13761 (further amended by E.O. 13804 on July 11, 2017) providing for the revocation of certain Sudan-related sanctions.  The action was taken in recognition of the positive actions taken by the government of Sudan.  Following the initial E.O., on October 6, 2017, the US Government officially revoked economic sanctions on the Government of Sudan under E.O.'s 13067 and 13412

     The revocation of certain sanctions indicates the Government of Sudan has continued to make strides in reducing conflict areas in Sudan, improving humanitarian access, and in cooperating with the US Government with regional conflicts and terrorism.

What changed?

  • Effective October 12, 2017 sections 1 and 2 of E.O. 13067 and all of E.O. 13412 were revoked.  Sections 1 and 2 blocked property of the government of Sudan and prohibited U.S. persons from engaging in transactions with Sudan and the government of Sudan.  The revocation of these provisions will allow U.S. persons to engage in transactions that were previously prohibited under the Sudanese Sanctions Regulations (SSR), 31 CFR 538.
  • Effective October 12, 2017, General License A authorizes exports and re-exports of certain agricultural commodities, medicine, and medical devices still controlled as a result of Sudan remaining on the State Sponsors of Terrorism List (SST List

What hasn't changed? 

  • The national emergency declared under E.O. 13067 remains in effect in regards to Sudan.
  • The OFAC sanction related to the Darfur conflict imposed under E.O. 13400 remains in effect.
  • OFAC designations of any Sudanese persons under E.O. 13067 and 13412 remain in effect
  • Sudan remains on the SST List; and as a result some agricultural, medicinal, and medical device exports and re-exports to Sudan still require an OFAC license (see General License A comment above).   
  • US persons and non-US persons will still need to obtain Department of Commerce Bureau of Industry and Security (BIS) licenses to export or re-export certain items such as commodities, software, and technology that are on the Commerce Control List (CCL), Supplement No. 1 to part 774 of the Export Administration Regulation (EAR), 15 CFR parts 730-774 or that require a license due to end-use or end-user concerns, 15 CFR 744. 

     Contact GCSG experts at info@globalcompliancesg.com with any questions or for more information on how we can assist you with your compliance program.  Visit our website at http://www.globalcompliancesg.com to learn more about our products and services. 

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