SanctionsRiskManagement Symposium

September 18-19, 2017 | The Princeton Club | New York, NY

incooperation with

SaskiaRietbroekPrincipal

SanctionsAlert.com(moderator)

It'sNotJustAbouttheListsAnymore:UsingCDDtoDetectHiddenUBOsandProhibitedEnd-Users

Tuesday,September19,2017,9:30– 10:30AM

TylerHandGlobalHeadofSanctions,

Interdiction&Anti-Corruption

WesternUnion

CarltonGreenePartner

Crowell&MoringLLP

KarenRobertsonGlobalTradeComplianceManager

UberTechnologies,Inc.

AndersA.L.Rodenberg,

HeadofFinancialInstitutions&Advisory

BureauvanDijk

1

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

2

TylerHandGlobalHeadofSanctions,Interdiction&Anti-CorruptionWesternUnion

ScreeningandRegulatoryExpectationsonUseofEnhancedData

“Investmentincapabilitiesisprojectedtoincreasefor89%ofinstitutionssurveyedintheAccenture2017ComplianceRiskStudyoverthenexttwoyearsasinstitutionsmanagethedemandsofthedigitalage.”

- “2017ComplianceRiskStudy”AccentureConsulting

“[Institutions]wanttocomplyandwanttheirsignificantinvestmentsmadeincompliancetoactuallyhelpprotectpublicsafetyandsecurity....”

- “AML:theTechFactor,”TheClearingHouse,GaryShiffman &GrantOak(2016)

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

RegulatoryExpectationsarenotperfectlyclear,butsomekeyfactorshavebeenidentified:

§ NatureoftheRelationship– directorindirect- with3rd party(ownershipduediligenceisexpectedwhenthereisadirectrelationship)§ OFACFAQ116

§ Geography associatedwiththe3rd partyoritstransactionsmayindicateneedforgreaterduediligence§ OFACCrimeaSanctionsAdvisory(7/30/2015)

§ Classoftradeorindustrysectorofthe3rd partymayindicateaneedforgreaterduediligence§ TheUseofExchangeHousesandTradingCompanies(1/10/2013)

§ Paymenthistorymayindicatetheneedforgreaterduediligence

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

§ Listsofgeographictermsassociatedwithsanctionedjurisdictions(e.g.,“Sevastopol”or“Persian”)

§ Listsofpartiesknowntobeactingfororonbehalfofsanctionedgroupsorentities(e.g.,membersoftheTaliban)

§ Listsofpartiesidentifiedthroughnegativemedia,publicreports,etc.asassociatedwithsanctionedpartiesorjurisdictions

§ Listsofpartiespotentiallyowned/controlledbyoraffiliatedwithsanctionedpartiesbasedoncorporateregistriesmaintainedbygovernmentagencies

§ Deeperdiveduediligence,includingresearchofin-countrypublicrecordshumanintelligence

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

VendorResourcesincludeenhanceddatalistsandotherservices

§ TrackregulatoryguidanceissuedbyFATF,OFACandotherofficialbodiesandincorporateitintocultureandprogram

§ UseyourRiskAssessmenttoidentifyareaswherethirdpartyresourceswouldbemostbeneficial

§ KnowYourVendor– understandwhatprocessestheyusetoassembledataorperformservicesand

§ Benchmark withcounterpartsatpeerinstitutions

§ Focusonmitigationofrealrisk(don’tuseresourcesorcreateprocessesthatarenoteffectiveinmitigatingrealrisk)

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

KeyConsiderationsforUsingVendorResourcestoMeetRegulatoryExpectations

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

7

KarenRobertsonGlobalTradeComplianceManagerUberTechnologies

IdentifyingHigh-riskAreasOfYourBusinessForExportControl

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

8

CommonRiskFactorsandBehaviors

1.Information“blackholes”§ Providehighlevelresources/generalguidelinestoeaseyourbusinesspartnersinto

compliance,thattheycanreferencebeforeengaginginriskygeographiesorwithpartnerswithredflags.

§ Digdeeperintocustomersexhibitingstrangepurchaseorpaymentbehaviortocreateusecasesforfraud,illicitactivities,lackofoversight,violationsoftermsofservice,andgeneralmisbehavior.Whatistheirhistory?

2.Resistancetointernaltrainingreducesvisibility§ Meetbusinessobjectionstocomplianceheadon,withfirmregulatorybackingand

top-down communicationtoreinforcethe messagethatcomplianceiskey!

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

9

CommonRiskFactorsandBehaviors(Cont.)3.Thinklocally,prepareglobally§ Insertclassificationreviewsasearlyinproductplanningstageswithtechnicalteamsaspossible,

soyoucanhelpguideandscopeimpactsofproductchangestoexport/importabilityinfuture.§ StandardprocedureforEDDshouldbeapplicableglobally,evenifthedetailschange--whereyou

mightuseabusinessregistrationdocumentinonecountry,anothercountrymaynothavetheequivalentsofindthoseparallelsandgatherasmuchaspossible.

4.Whattypeofcustomersdowereallywanttodobusinesswith?§ Pushpastbareminimumtothinkaboutriskandduediligenceholistically: TaketheDenied

PartiesScreeningandDunn&Bradstreet riskreviewsfurtherbyaddingintoscope:PEPs,highriskkeywords(e.g.nuclear,explosives,placenames,etc.), knownbutnotyetsanctionedterroristandhategroups.

§ Categorizecustomersbygeopoliticalrisk,industry/sector,productlines,outofordinarypurchasing,shipping,orpaymentbehaviors.

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

10

CarltonM.GreenePartnerCrowell&Moring

FinCEN’s CustomerDueDiligenceRule

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

11

FinCEN’s CustomerDueDiligenceRuleRequirementtoObtainBeneficialOwnershipInformation

§ Banks,broker-dealers,mutualfunds,FCMs,andintroducingbrokersincommodities(CoveredFinancialInstitutions)mustobtainidentifyinginformationonthebeneficialownersoftheir“legalentitycustomers”§ Eachindividualthatdirectlyorindirectlyowns25%ormoreequity§ Onepersonwith“significantcontrolresponsibility”(e.g., CEO,CFO,COO,Managing

Member,GeneralPartner,President,Treasurer)§ Identifiers(sameasCIPelementsforcustomers)§ Name§ DOB§ Address§ IdentificationNumber(TIN)– SSNorequivalent

§ Verificationofidentity– ifthroughdocuments,photocopiesareOK§ Canusestandardformincludedwithruleorequivalent

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

12

FinCEN’s CustomerDueDiligenceRuleRequirementtoObtainBeneficialOwnershipInformation

§ Canrelyoncustomer’scertificationofwhoqualifiesasbeneficialowners,butreliancemustbereasonable

§ Beneficialownershipinformationmayaffectafinancialinstitution’sobligations§ Sanctionsscreening(screenBOs,aggregatetheirinterests)§ CurrencyTransactionReports(aggregatetransactions)§ 314(a)Requests(accountsfor/transactionswithBOs)

§ MustrefreshBOeachtimea“newaccount”isopened,evenforexistingcustomers

§ MustconductongoingmonitoringofcustomersandrefreshBOandothercustomerinformationonariskbasis

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

13

CarltonM.GreenePartner202.624.2818carlton.greene@crowell.com

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

14

AndersA.L.RodenbergHeadofFinancialInstitutions&AdvisoryBureauvanDijk

Howthe50%rulehaschangedSanctionscomplianceradically

50%rulechangedSanctionsCompliancefundamentally:SanctionedorNot?

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

ComplexexamplefromOrbis:Cascadedown,indirectandaggregationownership

15

50%rulechangedSanctionsCompliancefundamentally:ChangeinOwnership

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

16

50%rulechangedSanctionsCompliancefundamentally:SectoralandOwnership

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

17

50%rulechangedSanctionsCompliancefundamentally:FailedmanualapproachinDelaware

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

18

Sanctions Risk ManagementSymposium

September 18-19, 2017 | The Princeton Club | New York, NY

incooperation with

Questions?

19

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

BonusSlidesProvidedby

20

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

FinancialCrimesEnforcementNetwork(FinCEN)

§ PartofU.S.Treasury§ Establishedin1990§ Safeguardsthefinancialsystemfromillicituseandcombats

moneylaunderingandpromotesnationalsecuritythroughthecollection,analysis,anddisseminationoffinancialintelligenceandstrategicuseoffinancialauthorities.

www.fincen.gov

21

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

CustomerDueDiligence(CDD)

22

§ Compilationoffactsaboutacustomer,prospectorbusinesspartner§ Enablesacompanyorfinancialinstitutiontoassesstheextentto

whichthisentityorpersonexposesittoarangeofrisks§ Includesmoneylaundering,terroristfinancingandsanctionsrisks.§ Useofrisk-basedapproach

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

OFAC50%ruleexample

CourtesyofBureauvanDijk

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

OFACEnforcementActionAgainstExxonMobil

24

§ July20,2017§ $2Mpenalty§ FirstOFACcaseinvolvingviolationsofRussia/Ukrainesanctions§ Dealtinservicesofindividualwhosepropertywasblocked§ SignedlegaldocumentsrelatedtooilandgasprojectsinRussiawithIgorSechin,PresidentofRosneft,andanindividualidentifiedonOFAC'sSDNlist

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

CustomerIdentificationProgram(CIP)

25

§ 31CFR1020.220 (FinCEN)§ ImplementedSection326ofthe

USAPatriotAct§ Mustbe

§ written§ appropriateforsizeandtypeof

business§ incorporatedintoBSA/AML

complianceprogram

§ Minimumrequirements:§ Name§ Dateofbirth§ Address§ IDnumber

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

OFAC’s50%Rule

26

§ Anyentityowned intheaggregate,directlyorindirectly,50%ormorebyoneormoreblockedpersons,isitselfconsideredtobeablockedperson.

§ Rulespeaksonlytoownershipandnottocontrol.§ AU.S.personmaynotengageinanytransactionswithsuchanentity,unlessauthorizedbyOFAC.

§ RuleappliestoentitiesonboththeSDNListand SSIList.

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

BankSecrecyAct(BSA)

27

§ Enactedin1970§ PrimaryU.S.anti-moneylaundering(AML)law§ 31USC5311 etseq§ EstablishesAMLprogram,recordkeepingandreportingrequirements forfinancialinstitutions

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

BeneficialOwner

28

Ingeneral,thenaturalperson(s)whoultimatelyownsorcontrolsacustomerand/orthenaturalpersononwhosebehalf

atransactionisbeingconducted.

Italsoincludesthosepersonswhoexerciseultimateeffectivecontroloveralegalpersonorarrangement.

Navigating the Turbulent Currents of International Sanctions and Export Controls | September 18-19, 2017 | The Princeton Club | New York, NY

Sanctions Risk Management Symposiumincooperation with

August2017U.S.SanctionsAgainstVenezuela

29

Impacting oil company Petroleos de Venezuela (PdVSA), andother Venezuelan government entities.

As sanctions were not “list-based” they place heavy burdens oncompliance and due diligence programs for companies andfinancial institutions doing business with the Venezuelangovernment and related entities.