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OFAC has issued OFAC Guidance: Production Submission Standards, updating its former delivery standards. The new document provides technical and general guidance to persons submitting material to OFAC and applies primarily to persons providing responses to administrative subpoenas, requests for information, disclosures, and especially for submissions that may entail voluminous documentation (e.g., more than 100 pages).

On Wednesday, FinCEN reported that the Financial Action Task Force (FATF), an intergovernmental body that establishes international standards for anti-money laundering, countering the financing of terrorism, and countering the financing of proliferation of weapons of mass destruction (AML/CFT/CPF), issued a public statement at the conclusion of its plenary meeting last month highlighting the growing financial connectivity of the Democratic People’s Republic of Korea (DPRK) with the international financial system, and reiterating the FATF’s concerns over the DPRK’s continued failure to address the significant deficiencies in its AML/CFT regime and the serious threats posed by the DPRK’s illicit activities related to the proliferation and financing of weapons of mass destruction. In order to protect the international financial system, the FATF continues to urge all jurisdictions to remain vigilant to these risks and calls for renewed implementation and enforcement of countermeasures against the DPRK.

The FATF also updated its lists of jurisdictions with strategic AML/CFT/CPF deficiencies. U.S. financial institutions should consider the FATF’s stance toward these jurisdictions when reviewing their obligations and risk-based policies, procedures, and practices.

On June 28, 2024, the FATF added Monaco and Venezuela to its list of Jurisdictions Under Increased Monitoring and also removed Jamaica and Türkiye from the list.

The FATF’s list of High-Risk Jurisdictions Subject to a Call for Action remains the same, with Iran, DPRK, and Burma subject to calls for action. Iran and DPRK are still subject to the FATF’s countermeasures, while Burma is still subject to the application of enhanced due diligence, but not countermeasures.

On Monday, the Federal Reserve Board announced it had fined Silvergate Capital Corporation and Silvergate Bank $43 million for deficiencies in Silvergate's monitoring of transactions in compliance with anti-money laundering laws.

The action was taken in coordination with an action by the Department of Financial Protection and Innovation of the State of California, the state supervisor of Silvergate. The penalties announced by the Board and state total $63 million. The U.S. Securities and Exchange Commission separately announced a penalty against Silvergate Capital Corporation.

Silvergate separately announced last year that it was voluntarily winding down its operations, and has now paid back all deposits to its customers.

• Consent order of assessment of civil money penalty

The NCUA has announced its barring of three individuals from participating in the affairs of any federally insured depository institution.

• Tracy Mikulencak, a former employee of A+ Federal Credit Union, Austin, Texas, agreed to the issuance of a prohibition order following a finding that she fraudulently took funds out of her own teller drawer, the Georgetown branch’s vault, and member accounts, defrauding the credit union and its members of $325,708.
• Javier DeJesus Narciso, a former employee of Merced School Employees Federal Credit Union, Merced, California, was issued a prohibition notice based on his conviction on one count of grad theft and embezzlement in connection with his employment
• Philip Brian Topping, a former employee of New Pilgrim Federal Credit Union, Birmingham, Alabama, was issued a prohibition notice based on his conviction on on one count of theft and embezzlement in connection with his employment

On Monday, the Treasury Department reported that OFAC has sanctioned a Mexico-based money launderer and China-based members of a money laundering organization with criminal links to the Sinaloa Cartel as part of ongoing efforts to disrupt the flow of illicit narcotics into the United States.

For the names and identification information of the three individuals, see the July 1, 2024, BankersOnline OFAC Update.

On Friday, FinCEN announced a proposed rule to strengthen and modernize financial institutions’ anti-money laundering and countering the financing of terrorism (AML/CFT) programs. While financial institutions have long maintained AML/CFT programs under existing regulations, this proposed rule would amend those regulations to explicitly require that such programs be effective, risk-based, and reasonably designed, enabling financial institutions to focus their resources and attention in a manner consistent with their risk profiles. Effective, risk-based, and reasonably designed AML/CFT programs are critical for protecting national security and the integrity of the U.S. financial system. The proposed amendments are based on changes to the Bank Secrecy Act (BSA) as enacted by the Anti-Money Laundering Act of 2020 (AML Act) and are a key component of Treasury’s objective of building a more effective and risk-based AML/CFT regulatory and supervisory regime.

This proposed rule would:

• amend the existing program rules to explicitly require financial institutions to establish, implement, and maintain effective, risk-based, and reasonably designed AML/CFT programs with certain minimum components, including a mandatory risk assessment process
• require financial institutions to review government-wide AML/CFT priorities and incorporate them, as appropriate, into risk-based programs, as well as provide for certain technical changes to program requirements
• promote clarity and consistency across FinCEN’s program rules for different types of financial institutions

The proposal also articulates certain broader considerations for an effective and risk-based AML/CFT framework as envisioned by the AML Act. For example, through its emphasis on risk-based AML/CFT programs, the proposed rule seeks to avoid one-size-fits-all approaches to customer risk that can lead to financial institutions declining to provide financial services to entire categories of customers. Friday’s proposal is consistent with a key recommendation in Treasury’s De-risking Strategy, which recommended proposing regulations to require financial institutions to have reasonably designed and risk-based AML/CFT programs supervised on a risk basis and taking into consideration the effects of financial inclusion. Finally, the proposed rule would encourage financial institutions to modernize their AML/CFT programs where appropriate to responsibly innovate, while still managing illicit finance risks.

FinCEN's proposal was prepared in consultation with the Federal Reserve Board, the OCC, the FDIC, and the NCUA in order to collectively issue proposed amendments to their respective BSA compliance program rules for the institutions they supervise.

Written comments on FinCEN’s proposed rule must be received on or before 60 days following its publication in the Federal Register.

• Proposed Rule
• Fact Sheet
• Publication update: Published on 7/3/2024 at 89 FR 55428 with a comment period ending on 9/3/2024

OFAC has announced a $538,000 settlement with Mondo TV, S.p.a., an Italy-based animation company. Mondo has agreed to settle its potential civil liability for 18 apparent violations of the North Korea Sanctions Regulations.

Between May 2019 and November 2021, Mondo caused U.S. financial institutions to process approximately $537,939 in payments for animation work Mondo outsourced to a Government of North Korea-owned animation studio. This settlement amount reflects OFAC's determination that Mondo's conduct was non-egregious but not voluntarily disclosed.

FinCEN has reported it has issued a final rule under section 311 of the USA PATRIOT Act (section 311) that severs Al-Huda Bank from the United States financial system by prohibiting domestic financial institutions and agencies from opening or maintaining a correspondent account for or on behalf of Al-Huda Bank, an Iraqi bank that serves as a conduit for terrorist financing.

On January 31, 2024, FinCEN issued a finding and notice of proposed rulemaking (NPRM) that identified Al-Huda Bank as a foreign financial institution of primary money laundering concern. As described in the finding, Al-Huda Bank has for years exploited its access to U.S. dollars to support designated foreign terrorist organizations, including Iran’s Islamic Revolutionary Guard Corps (IRGC) and IRGC-Quds Force, as well as Iran-aligned Iraqi militias Kata’ib Hizballah and Asa’ib Ahl al-Haq. Moreover, the chairman of Al-Huda Bank is complicit in Al-Huda Bank’s illicit financial activities, including money laundering through front companies that conceal the true nature of and parties involved in illicit transactions, ultimately enabling the financing of terrorism.

FinCEN is taking this section 311 action to protect the United States financial system from Al-Huda Bank’s illicit activity. Pursuant to this final rule, covered financial institutions are now prohibited from opening or maintaining correspondent accounts for or on behalf of Al-Huda Bank, and are required to take reasonable steps not to process transactions for the correspondent account of a foreign banking institution in the United States if such a transaction involves Al-Huda Bank, preventing indirect access by Al-Huda Bank to the United States financial system. This final rule also requires covered financial institutions to apply special due diligence to their foreign correspondent accounts that is reasonably designed to guard against their use to process transactions involving Al-Huda Bank.

The rule adds section 663 to 31 CFR Part 1010, effective upon publication in the Federal Register. BankersOnline has added section 663 to its 31 CFR Part 1010 pages.

The National Credit Union Administration released today its annual Cybersecurity and Credit Union System Resilience Report. The report summarizes the current cybersecurity threat landscape, highlights the agency’s key cybersecurity initiatives, and outlines the agency’s ongoing efforts to enhance cybersecurity preparedness and resilience within the credit union industry.

The Treasury Department yesterday reported that OFAC had sanctioned nearly 50 entities and individuals that constitute multiple branches of a sprawling “shadow banking” network used by Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL) and Islamic Revolutionary Guard Corps (IRGC) to gain illicit access to the international financial system and process the equivalent of billions of dollars since 2020. MODAFL and the IRGC engage in several commercial revenue-generating activities, most notably the sale of Iranian oil and petrochemicals.

Networks of Iranian exchange houses and dozens of foreign cover companies under their control enable MODAFL and the IRGC to disguise the revenue they generate abroad that is then available to use for a range of MODAFL and IRGC activities, including the procurement and development of advanced weapons systems such as unmanned aerial vehicles. This revenue also supports the provision of weapons and funding to Iran’s regional proxy groups, including Yemen’s Houthis, who continue a campaign of reckless attacks on global shipping, as well as the transfer of UAVs to Russia for use in its war of aggression against Ukraine.

For the names and identification information of the designated parties, see the June 25, 2024, BankersOnline OFAC Update.