“If I had been a better lawyer…” Scott Rothstein’s wife and her lawyer sentenced in Ponzi scheme money laundering case

By Christine Duhaime | November 13th, 2013

Kim Rothstein, the so-called “free-spending” wife of Scott Rothstein, was sentenced to 18 months in jail yesterday for plotting to hide over $1 million worth of jewelry to avoid it being seized as proceeds of crime.

Mr. Rothstein is a former lawyer incarcerated for running a $1.4 billion Ponzi scheme through the trust accounts of his now defunct law firm. In 2010, he was sentenced to 50 years in prison for money laundering, fraud and racketeering. At the time of his arrest, he owned more than a dozen luxury homes, 21 exotic cars, a 87-foot yacht, and a handful of restaurants. According to reporters, he spent over $50,000 a month on escorts and prostitutes. Nine years before, he was worth less than $200,000. The incredible fortune he amassed in such a short period of time was derived illicitly, and much of it from firm clients. His Ponzi scheme was the largest investment fraud scheme in Florida history.

At the time of Mr. Rothstein’s arrest, his wife, her lawyer Scott Saidel, and one of her close friends, Stacie Weisman, conspired to hide the jewelry. All three were charged with conspiracy to commit money laundering and each pleaded guilty.

Last month, Mr. Saidel was sentenced to three years in jail. His sentence was more harsh than Ms. Rothstein because he broke the law to service his client. As U.S. District Judge Robin Rosenbaum noted: “It’s good to be a zealous advocate, but [lawyers] must do it within the bounds of the law.”

Ms. Rothstein said that she never paid her lawyer. At his sentencing, Mr. Saidel apologized, saying:

“I am profoundly sorry for the conduct that led me here today,” he said. “I apologize to my family and friends, who I have let down and hurt and embarrassed, and to my client Kimberly Rothstein, who might not find herself standing here in this very same spot at a later time, if I had simply been a better lawyer.”

Scott Rothstein’s Ponzi scheme took two novel forms – he solicited clients and investors to purchase hundreds of millions of dollars of structured settlements at discount prices that would be repaid at face value over time. He also fabricated court orders, forging the signatures of federal court judges, that showed that his clients had been awarded large sums of money in lawsuits. Clients were told that defendants had transferred funds to the Cayman Islands and in order to recover the funds, they had to post bonds worth millions of dollars with his firm.

Although Mr. Rothstein is now in jail, what U.S. District Judge James Cohn called the tsunami left in his wake is far from over – Rothstein’s 70 lawyer firm went bankrupt and 35 of its former lawyers were investigated. The TD Bank, N.A. was sued by several parties for allegedly facilitating Rothstein’s laundering activities, former associates and employees of the firm were sued to repay lavish bonuses and gifts (that sometimes included houses and cars) from their boss by the firm’s receiver because it is proceeds of crime, and the firm’s COO Debra Villegas was sentenced to a 10-year term in prison after pleading guilty to conspiracy to launder money through the firm.

SEC crowdfunding rules include anti-money laundering and financial crime requirements while Canadian regulators lag behind on issuing rules

By Christine Duhaime | November 11th, 2013

After more than a year, the Securities and Exchange Commission has released draft crowdfunding equity rules (the “Rules“) for comment under the U.S. Jumpstart Our Business Startups Act (the “JOBS Act“).

The JOBS Act was brought into force in 2012 in an effort to facilitate the injection of capital in growing companies and start-ups. With respect to crowdfunding, its objective was to allow cost-effective access to capital provided over the Internet by removing unnecessary and burdensome regulations, while maintaining integrity of the financial markets and investor protection.

A. Overview of exemption requirements

Under the Rules, the Securities Act of 1933 would exempt certain crowdfunding transactions from registration provided certain conditions were met. Some of the key requirements for qualifying under the exemption are as follows:

    1. Limitations on aggregate sales – the aggregate amount sold to all investors by the issuer in reliance on the exemption in a 12-month period cannot exceed $1 million;
    2. Limitations on aggregate sales to individual investors – the aggregate amount sold to any one investor by the issuer, including amounts sold in reliance on the exemption, in a 12-month period cannot exceed the greater of $2,000 or 5% of the annual income or net worth of the investor if the investor’s net worth is $100,000 or less;
    3. Limitation on crowding the funding –issuers could only use one intermediary to crowdfund an offering and the intermediary can only offer the investment opportunity over the Internet;
    4. Exclusion of private and hedge funds and others –certain issuers may not use the exemption to crowdfund, such as those not registered as corporate entities in the U.S., reporting issuers, investment companies and others determined by the SEC as inadmissible. Hedge and private funds are ineligible in any event by virtue of the fact that they rely on the exclusions for investment companies under the Investment Company Act of 1940;
    5. Provide certain disclosures – issuers would be required to file certain disclosure documents including their business plan, financial condition, intended use of proceeds of the offering and ownership and capital structure of the issuers, and make the foregoing available to investors and annually file certain reports of the results of operations and financial statements; and
    6. Advertising restrictions – issuers would not be able to advertise the terms of offerings except for notices that direct investors to the crowdfund or broker.

B. Anti-money laundering and financial crime reporting applicable to crowdfunding

The Rules are believed to be the first set of crowdfunding rules that introduce measures that would require crowdfunds to address financial crime (market manipulation, illicit financing and fraud), money laundering, economic sanctions and terrorist financing concerns.

Crowdfunding is particularly susceptible to money laundering and other financial crimes. There are many reasons why that is the case, including that they facilitate the offering of microcap or low-priced securities which by their nature are more susceptible to fraud and market manipulation. In the securities context, financial crimes occur most frequency (by volume not dollar value) with private placements and low-priced securities. Private placements pose a money laundering risk because they are often used to generate illicit assets through market manipulation, insider trading and fraud. In addition, unlawfully acquired assets can be used to purchase securities with proceeds of crime in order to resell them and create the appearance of legitimately sourced funds. The combined effect of crowdfunded securities being low-priced, placed in offerings that are exempt from registration and not subject to the filing review process of a registered offering, makes crowdfunding open to being used as a vehicle for money laundering and other financial crimes.

The objective in respect of the Rules is to preserve the integrity of the financial markets and ensure they are not used, however inadvertently, for money laundering or other financial crimes. The preservation of the integrity of the financial markets is as important for prospective investors, as it is for regulatory agencies and financial institutions, all of whom have a vested interest in ensuring that the markets remain free of financial crime.

The Rules propose that crowdfunds be required to monitor transactions and report under the Bank Secrecy Act (the “BSA“). Not all of the BSA requirements would apply to crowdfunding but certainly all of those applicable to “introducing brokers” under the category of registered “broker-dealers” would be applicable except to the extent that the transaction does not engage anti-money laundering (“AML“) obligations. The SEC’s position is that, for the purposes of AML, crowdfunds are a type of hybrid “introducing broker” and “broker-dealer”.

Under the BSA, among other things, the AML requirements most likely to be applicable to crowdfunding are as follows:

    1. Establishing and maintaining an AML program
    2. Establishing and maintaining a customer identification program
    3. Monitoring for and filing reports of suspicious activity
    4. Complying with requests for information from the Financial Crimes Enforcement Network

AML Program Requirement

Pursuant to the Rules, the SEC is proposing that crowdfunds satisfy the AML Program Requirement by implementing and maintaining a written AML Program that includes, at a minimum: (1) policies, procedures and internal controls reasonably designed to achieve compliance with the BSA; (2) policies and procedures that can be reasonably expected to detect and cause the reporting of required transactions; (3) the designation of an AML compliance officer; (4) ongoing AML employee training; and (5) an independent test of the crowdfund’s AML Program.

ID Requirement

With respect to the ID Requirement, pursuant to the BSA regulations, crowdfunds will need to have a written ID program that includes procedures for: (1) obtaining customer identifying information from each person prior to an account opening; (2) verifying the identity of each customer to the extent reasonable and practicable, within a reasonable time before or after account opening; (3) making and maintaining a record of documents used for identity verification; (4) determining, within a reasonable time after account opening or earlier, whether a person or entity is a designated suspected terrorist or terrorist organization, or is subject to U.S. sanctions as designated by OFAC; and (5) providing customers with adequate notice, prior to opening an account, that requested information is being sought to verify identity without disclosing the filing of a SAR.

Crowdfunds may rely on financial institutions to fulfill some or all of the requirements of its ID Requirements if such reliance is reasonable and the entity relied upon is subject to AML compliance obligations and federally supervised in respect thereof. The crowdfund and the financial institution must have entered into a contract which requires an annual certification by the financial institution to the crowdfund confirming its AML compliance.

Suspicious Activities

Under the SAR Requirement, crowdfunds will have to file a suspicious activity report if: (1) a transaction is conducted or attempted to be conducted by, at, or through a crowdfund; (2) the transaction involves or aggregates funds or other assets of at least $5,000; and (3) the crowdfund knows, suspects or has reason to suspect that the transaction: (i) involves funds or is intended to disguise funds derived from illegal activity, (ii) is designed to evade requirements of the BSA, (iii) has no business or apparent lawful purpose, and the crowdfund knows of no reasonable explanation for the transaction after examining the available facts, or (iv) involves the use of the crowdfund to facilitate criminal activity.

FinCEN Investigations

Crowdfunds will be required to respond to mandatory requests for information by FinCEN on behalf of federal law enforcement agencies. Agencies with criminal investigative authority can request that FinCEN solicit, on its behalf, certain information and FinCEN also may make similar requests on its own behalf or on behalf of the Treasury to the crowdfund.

Canada’s “crackstarter” crowdfunding campaign

In May of this year, a crowdfunding website successfully raised $200,000 to pay organized crime in Toronto to acquire a video of the Mayor of Toronto allegedly taking crack cocaine. That fundraising exercise received worldwide attention, partly because it raised numerous ethical, criminal, investor protection, regulatory and money laundering issues for crowdfunding.

L’investigation de la fraude de $1.6B au marche du carbone en France continue en Israel

By Christine Duhaime | November 9th, 2013

Blanchiment d’argent

La police israelienne assist la France dans l’enquete sur des faits de blanchiment d’argent concernant le scandale de la fraude au marche du carbone en France qui aurait coute 1,6B d’euros au Tresor public. Le scam consistait a acheter hors taxes aux Pays-bas des quotas de CO2 credits dans le cadre de la bourse d’echange du protocole de Kyoto et de l’EU ETS puis de les revendre en France avec un taux de TVA de 19,6% en reversaient pas la TVA au Tresor.

Reportage par Christine Duhaime.

The $10 million AML compliance plan that cost a hedge fund $1.8 billion

By Christine Duhaime | November 4th, 2013

Largest insider trading settlement ever

SAC Capital Advisors has reached a global settlement (the “Settlement“) with the U.S. Department of Justice to plead guilty to insider trading, pay a record US$1.8 billion penalty, and agree to a term of probation of five years. The Settlement is the largest financial penalty in history for insider trading.

The Settlement resolves the criminal action for wire and securities fraud and the civil forfeiture and money laundering action, both filed against certain SAC Capital entities in the Southern District of New York.

Hedge fund must close to outside investors & have new compliance procedures

Pursuant to the Settlement, four SAC Capital entities will plead guilty to all of the charges alleged against them and in addition to paying US$1.8 billion, will terminate their investment advisory business. That means that the hedge funds will be closed to outside investors. Any remaining SAC Capital operational entities will be required to have effective anti-money laundering and financial crime compliance procedures in place prepared by outside qualified persons.

The payment of $1.8 billion is comprised of a $900 million penalty in respect of the criminal action, and $900 million to settle the money laundering forfeiture action.

Settlement subject to Court approval

The Settlement contains a plea agreement which is subject to approval by the Court. If the Court imposes a higher penalty, the SAC Capital entities may withdraw their guilty pleas. The Court is unlikely to do so because the penalties are higher than the U.S. Federal Sentencing Guidelines.

The Settlement expressly does not apply to SAC Capital employees, owners or shareholders. Certain employees are already being prosecuted in connection with the case and whopping bonuses paid to some of them may be claimed by the government as alleged proceeds of crime.

The case was novel for several reasons, including that it was only the second time in history that a corporate defendant was criminally indicted in the U.S., the first being Arthur Anderson.

It is also the first time a major Wall Street firm pleaded guilty criminally in many years, the last being Michael Milken’s firm which paid $1 billion in penalties.

The $10 million compliance plan & its adequacy

It was also the first time that the court battle, had it progressed, would have centered on the adequacy or not, of a compliance program, whose purpose is to detect and deter financial crimes, like insider trading and money laundering. The prosecution was being closely watched by compliance experts and financial institutions globally, including banks, brokers, foreign mutual funds and other managed funds, commodity pools and hedge funds, which grapple with issues related to the adequacy of compliance regimes, and whether they will pass muster in the face of a prospective prosecution.

SAC Capital maintained that it spent millions of dollars annually on its compliance function, including an astounding $10 million to have a compliance plan prepared. It’s hard to fathom paying $10 million to a firm for an AML compliance plan that, at the end of the day, was not the least bit effective and cost the company $1.8 billion.

Organized crime alleged to control some ATMs in Canada for money laundering

By Christine Duhaime | October 31st, 2013

Organized Crime & Private ATMs

According to a report by the RCMP reported by Radio-Canada, organized crime in Canada is using private ATMs to launder proceeds of crime. The RCMP estimates that at least $315 million is laundered each year by private ATMs and some of those are connected to the Hells Angels in Quebec.

In order to test whether ATMs were being used for money laundering, a journalist from Radio-Canada spoke with several private ATM vendors and asked about the prospect of laundering money.

One ATM vendor’s response? “Let’s say you want to just wash $2,000 per month. For that, there’s no problem. A person gives you a cheque, the money goes in your bank. You…you take that money from the bank, then you put it into the ATM. That’s how you do it.” (Translated verbatim by us).

Private ATMs, are also known as white label cash machines, because they are not owned by financial institutions.

ATMs & strip clubs

In Canada, private ATMs tend to be located in strip clubs, massage parlours, bars and other cash-intensive businesses, such as casinos.

It has long been suspected that the reason for that is precisely to facilitate money laundering in respect of strip clubs and massage parlours. In Canada, strip clubs and message/escort parlours are known venues for prostitution. There is likely not a strip club or escort parlour in Vancouver or Toronto that does not have an ATM on its premises, or right outside the front door. That’s no coincidence.

Private ATMS are also used for tax evasion and fraud because some merchants who operate strip clubs and massage / escort parlours encourage clients to extract cash for services that are not invoiced or recorded. The amount of money lost in tax revenues from tax evasion and fraud through private ATMs is more significant than the amount laundered.

Micro-structuring by organized crime

With respect to money laundering, private ATMs are often used to “microstructure” – a money laundering law term that means the depositing and withdrawing of small sums of money that are consistent with normal ATM withdrawal amounts, and thus are not flagged. And because they are not flagged, they go undetected by anti-money laundering specialists at banks. Organized crime members will make voluminous small daily cash deposits totaling hundreds of thousands of dollars into 100 or more bank accounts using private ATMs to avoid triggering anti-money laundering reporting requirements.

The difficulty in opening numerous bank accounts by organized crime is cured by paying people on the street, or teenagers, to open numerous bank accounts with fake ID. Private ATMs are preferred because of the lack of regulatory oversight.

Private ATM companies are not required to be vetted or registered to provide services and nor are there limitations on ownership or regulatory monitoring involved in respect of the services or the service providers.

Private ATM companies pose an increased risk to banks and should be treated as high-risk in money laundering compliance risk assessments. The risks for banks are not just financial but reputational.

Liberty Reserve founder pleads guilty to money laundering

By Christine Duhaime | October 31st, 2013

Money laundering conviction

The US government announced that one of the co-founders of Liberty Reserve, Vladimir Kats, pleaded guilty to money laundering and operating an unlicensed money transmitting business yesterday. The US government found that Liberty Reserve was one of the world’s most popular virtual currency services.

It’s co-founders were indicted in the U.S. in May 2013, for allegedly laundering $6 billion in proceeds of crime in what is believed to be the largest online money laundering case in history.

The U.S. Department of Justice alleged that Liberty Reserve acted as an unlicensed global online banker for organized crime which provided a vehicle for money laundering vast sums anonymously that were difficult to trace. The DoJ says that users of the service could open an account without verification. Liberty Reserve had over 1 million users and processed 55 million transactions that allegedly resulted in the laundering of $6 billion from predicate offences which included child pornography, credit card fraud, identity theft, investment fraud, computer hacking and drug trafficking.

Forex mainstay for emerging markets

The US government says that Liberty Reserve was emerging as a leader in the world of cyberfinance – it was a leading payment channel for brokers, traders and some investors transacting in emerging markets where foreign currency restrictions prevent significant trades, such as Brazil, Nigeria, Pakistan, Argentina, and Malaysia.

Potential 85-year sentence

The US government says that its founder Kats, pleaded guilty to conspiracy to commit money laundering, conspiracy to operate an unlicensed money transmitting business, operating an unlicensed money transmitting business, receiving child pornography and marriage fraud. He has not been sentenced but he faces a maximum of 85 years in prison – the stiffest sentence is child pornography which carries a maximum sentence of 40 years in prison.

Part 2 – Macau casinos with junket operators face regulatory balancing act amid international money laundering concerns

By Christine Duhaime | October 25th, 2013

Increased pressure on Macau’s casinos

Macau is facing a delicate balancing act – how to satisfy mounting international demands to crack down on money laundering and other criminal activities in its $38 billion gambling industry, without killing the goose that lays the golden egg.

Finding a way of regulating the junket operators, which bring in about 75% of Macau’s annual gambling revenue, is central to the problem.

Many warn that efforts to clamp down on the junkets, which have acted as middlemen between Macau and China’s high rollers, would have a major impact on casino operators and may scare away the Mainland big spenders.

Still, with the rhetoric ramping up, most say that eventually some action will need to be taken.

Concern about gambling crimes

At home, Macau’s Prosecutor General Ho Chio Meng last week called on the government to amend criminal laws to address what he called serious issues arising from the gambling sector and the increase in criminal activity from extortion cases.

While overseas, a U.S. Congressional Committee on China urged Macau to tackle money laundering at its casinos, saying Macau’s gambling industry is reportedly tied to widespread corruption and laundering of proceeds of crime out of Mainland China that is fueled by junkets.

The U.S. Department of the Treasury, in testifying before that Commission, noted that Macau does not have AML laws to deal with cross border currency declarations, casino know your client requirements (KYC), or proper threshold reporting of casino transactions.

But it also testified that changes are afoot. Both the Chinese government and Macau officials are stepping up efforts to regulate the gambling industry and are working very closely with China’s Deputy Governor Li of the People’s Bank of China to stop illicit money flows to Macau from Mainland China.

U.S. regulators also appear to be turning up the heat on U.S.-based casinos with operations in the Chinese territory, pointing out that violations overseas could have repercussions at home.

The Nevada Gambling Commission, which has oversight over Nevada-based casinos that operate in Macau, recently confirmed that removing money from China to Macau by junket operators in violation of China’s currency restrictions raised suitability issues.

Suitability issues place casinos at risk of losing the right to operate casinos in the U.S. Steve Wynn, the CEO of Wynn Macau, brought that point home last week before the Massachusetts Gaming Commission. He questioned whether he risks being sanctioned in the U.S. over his Macau operations, which comply with the less stringent gaming rules in force in the Chinese territory.

Economic impacts

The prospect of tougher regulations may drive gamblers away from Macau and materially affect its revenues, although no one knows for sure what the economic impact may be. The biggest junket operators Neptune, Golden, Jimei and Dore would be the hardest hit.

They account for more than half the monthly junket turnover with VIP Room gamblers spending between US$10,000 and US$20 million each per trip.

In terms of the casinos themselves, SJM Holdings said VIP revenue was up 10.5 percent in the first half to HKD$29.2 billion ($3.7 billion), accounting for more than 69% of revenue, according to its interim report.

Casinos are so dependent on junket operators that any news that Macau, or China, intend to restrict or monitor currency imports or impose greater regulation sends the share prices of publicly listed casinos with operations in Macau into a downward spiral.

When Macau officials said in July that they planned to implement cross border currency declaration requirements for visitors as part of overall efforts to improve AML rules, SJM Holdings shares dropped 3% on the day, while Galaxy Entertainment Group shed 3.8%.

However, there are no timelines set for such a change and analysts dismissed the proposal. J.P Morgan put out a note saying the impact of such controls is likely to be limited and difficult to implement given the amount of cross border traffic.

Currency declarations are not the only AML concerns – there are other deficiencies including no counter-terrorist financing requirements, few KYC requirements and an unrealistically high reporting threshold for transactions of US$62,000 (compared with $3,000 in other countries).

Pressure from abroad on AML

Ultimately, the pressure to effect changes will come from abroad. The Financial Action Task Force (FATF), is a Paris-based organization that evaluates countries on compliance with its AML standards every few years. Countries that are in serious non-compliance risk being placed on an international blacklist, which negatively affects their international banking relationships and credit ratings. The potential blacklisting of Macau would be politically embarrassing for China, particularly given that it now co-chairs Asia’s version of the FATF, the Asia Pacific Group.

In June of this year, U.S. Congressional Committee members suggested that the FATF evaluation of Macau be prioritized to address what it called the huge problem with VIP Rooms operated by junkets outside of the AML regulatory framework. It wants to see an end to lax AML controls over VIP Room operations and for Macau casinos to be fully compliant with international AML standards that apply to other casinos worldwide.

However, taking control of the VIP rooms away from the junket operators and making casinos responsible as in the U.S. would likely kill the business and drive away the high-rolling Chinese gamblers, who are attracted by the anonymity under which they are currently allowed to operate.

A more palatable solution would be to make the junket operators themselves AML compliant, as it would also likely involve a transition period.

Mindful of the accusations and the potential fallout, junket operators have been working towards improving their image.

Slowly, they are coming around to the realization that they need to have a better understanding of international AML requirements with a view to demonstrating that they are prepared to embrace AML compliance to preserve the gambling industry.

As we reported in last week’s article, they are also seeking to diversify into other business activities to reduce their dependence on VIP Rooms.

Part 1 of this article is available here.

Carson Yeung says he accepted $2 million from suspected triad in money laundering trial

By Christine Duhaime | October 25th, 2013

Carson Yeung, the Hong Kong tycoon who is on trial in Hong Kong for alleged money laundering admitted in Court that he accepted 12 wire transfers totalling approximately $2 million in funds from a Macau casino that were sent by an alleged Triad boss – Cheung Chi Tai. Mr. Cheung is also alleged to have had ties to a junket operator named Neptune Group. Junket operators brings wealthy residents from Mainland China to Macau to gamble. Mr. Cheung is alleged to be the boss of the Wo Hop To, a Hong Kong based Triad gang located in Wan Chai. Mr. Yeung maintains that he became wealthy running his hair salon in Hong Kong and trading in penny stocks.

Caesars Entertainment under investigation for alleged anti-money laundering compliance failures

By Christine Duhaime | October 21st, 2013

Anti-money laundering investigation

Caesars Entertainment Corp. said today that FinCEN is investigating it for potential violations of the Bank Secrecy Act over anti-money laundering compliance issues. The statement was made in its filings with the Securities Exchange Commission. According to the statement, FinCEN is considering whether to assess a civil penalty or take enforcement action. It is the second time in as many months that enforcement agencies have focussed on the gambling sector for anti-money laundering compliance.

Yesterday, according to news reports, Caesars dropped the Gansevoort Hotel from its latest proposed Las Vegas project due to concerns raised by gambling regulators in respect of ties an investor in Gansevoort allegedly has to organized crime in Russia. Earlier in the month, Caesars dropped out of a Massachusetts project after gaming investigators recommended it not be registered in that state over similar concerns. In gambling regulatory law, preservation of the integrity of gambling is paramount and prospective licensees will not be registered if there are potential integrity issues involving suppliers, partners, joint venturers, investors, directors or officers or in any other respect.

Last month, Las Vegas Sands agreed to pay $47 million to settle money laundering allegations involving high rollers at its VIP Room.

Foreign firm hit with $1.5 million fine for sanctions violations & failing to have compliance regime

By Christine Duhaime | October 21st, 2013

The Office of Foreign Asset Control (“OFAC“) has assessed a penalty of $1.5 million against Alma Investment LLC, a foreign investment firm and fund, for violating U.S. sanctions by sending electronic wires totaling $103,283 through U.S. financial institutions for the benefit of persons in Iran. The electronic wires are a prohibited export to Iran under §560.204 of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. 560 (the “Regulations“).

Since a 1997 Presidential Executive Order, virtually all trade and investment activities with Iran by U.S. persons, wherever located, are prohibited. With respect to exports to Iran, unless licensed by OFAC, goods, technology, or services may not be exported, re-exported, sold or supplied, directly or indirectly, from the U.S. or by a U.S. person, wherever located, to Iran or the Government of Iran. The ban on providing services includes any brokering or financing function from the U.S. or by U.S. persons, wherever located, and that includes, inter alia, a foreign entity if it has a U.S. arm, subsidiary or JV.

Criminal penalties for violations of the sanctions include a fine of up to $1 million and a term of imprisonment of up to 20 years. Civil penalties do not exceed the greater of $250,000 or an amount that is twice the amount of the transaction that resulted in the violation.

The gravity of the penalty against the foreign firm reflected the fact that OFAC found that it: acted recklessly or willfully by concealing information on the wire transfers that associated it with Iran; significantly harmed the U.S. sanctions enforcement; and did not have a compliance program.

OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the U.S.

Foreign persons, associations, firms, funds and JVs may be subject to OFAC sanctions under U.S. law by virtue of having a branch office in the U.S., or an entity incorporated in a U.S. jurisdiction.