Sanctions & Export Controls: Cryptocurrency sector under scrutiny, Guidelines for AML/CFT compliance officers and the Taliban’s seizure of power in Afghanistan

In July and August 2021, scrutiny of the cryptocurrency sector tightened as the Dutch Central Bank warned a cryptocurrency exchange company for offering its services in the Netherlands without having obtained the mandatory registration. At the European level, a consultation on new guidelines for the role of anti-money laundering and countering the financing of terrorism (“AML/CFT”) compliance officers was launched. Additionally, a public consultation on a potential review of the EU Blocking Statutewas published. Moreover, Canada, the UK and the US imposed further sanctions on the Belarusian regime considering the anniversary of the fraudulent presidential elections in 2020. Lastly,the international community responded to the Taliban’s seizure of power in Afghanistan. This, and more, in this newsletter.

  1. The Netherlands
  • Netherlands (Dutch Money Laundering and Terrorist Financing Act / “Wwft”) – On 18 August 2021, the central bank of the Netherlands, De Nederlandsche Bank (“DNB”), warned cryptocurrency exchange company Binance for offering its services in the Netherlands without having obtained the mandatory registration with DNB. According to DNB, Binance currently violates the Wwft as it: (1) offers services for exchanging between virtual currencies and fiduciary currencies (e.g., banknotes and coins), and (2) offers custodian wallets, both without registration. According to DNB, this creates the risk for customers to become involved in money laundering or terrorist financing. Dutch newspaper Het Financieele Dagblad has reported that it remains unclear whether DNB will take enforcement action against Binance, for example, by imposing a penalty. Binance has responded that it is working on a request for registration with DNB. As of 21 May 2020, cryptocurrency exchange services are subject to DNB’s supervision. This means, amongst others, that cryptocurrency services providers are obliged to register with DNB. In light of these new obligations and the recent warning against Binance, BenninkAmar expects increasing scrutiny by DNB of cryptocurrency service providers in the Netherlands. However, the enforcement actions of DNB are not uncontested as the Court of Rotterdam recently gave DNB a slap on the wrist for overly stringent supervision in the Bitonic case.

2. European Union & United Kingdom

a. European Union

  • EU / Lebanon (Council adopts framework for sanctions) – On 30 July 2021, the Council of the European Union adopted a framework for targeted restrictive measures to address the situation in Lebanon. This framework provides for the possibility of imposing sanctions against persons and entities who are responsible for undermining democracy or the rule of law in Lebanon. Since prime minister Hassan Diab resigned last year following days of protests over the explosion in Beirut’s port, the situation in Lebanon deteriorated into a “grave financial, economic, social and political crisis”, the Council concluded in December 2020. At the Foreign Affairs Council meeting of 12 July 2021, EU Member States subsequently agreed to establish a sanctions regime against those responsible for the situation. It remains to be seen which entities will actually be designated and what type of restrictive measures will be imposed under the new framework, as those decisions are taken separately. According to France24, diplomats have said sanctioned persons and entities are not likely to be decided upon before the end of the summer. With the adoption of the framework for sanctions against Lebanon, the EU has a total of more than 40 different sanctions regimes in place, some mandated by the United Nations Security Council and others are adopted autonomously by the EU.

  • EU (EBA consultation on new AML/CFT Guidelines) – On 2 August 2021, the European Banking Authority (“EBA”) launched a public consultation on new Guidelines on the role, tasks and responsibilities of AML/CFT compliance officers. Once adopted, the Guidelines will apply to all financial sector operators that fall within the scope of Directive 2015/849 on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing. According to the EBA, the draft Guidelines, for the first time, comprehensively address the whole AML/CFT governance set-up, including at group level. Amongst other things, the Guidelines lay down clear expectations of the role, tasks and responsibilities of the AML/CFT compliance officers and the management body. Where a financial services operator is part of a group, the draft Guidelines provide that a Group AML/CFT compliance officer in the parent company should be appointed to ensure the establishment and implementation of effective group-wide AML/CFT policies. The draft Guidelines further specify what information should at least be included in the activity report of an AML/CFT compliance officer to the management body. The consultation closes on 2 November 2021.

  • EU (EU Blocking Statute) – On 10 August 2021, the Association of Certified Sanctions Specialists (“ACSS”) published an article about the European Commission’s public consultation on whether, and if so, how to amend Council Regulation (EC) No. 2271/96 (“EU Blocking Statute”). In this article Sebastiaan Bennink, partner at BenninkAmar, is quoted, underscoring that the call for input and the potential subsequent amendment will be helpful. “The non-compromising wording of the current statute results in direct conflict between the EU and US position, placing businesses in a difficult position of ensuring compliance with EU law, while also seeking to minimize their risk under US extraterritorial sanctions. Hopefully, a reviewed wording will deter third countries from illegally imposing extraterritorial sanctions, while protecting EU operators rather than consequently harming their interests, which is contradictory with the EU Blocking Statute’s raison d’être.” The European Commission highlighted the need to review the EU Blocking Statute in the rapidly changing economic landscape due to the increasing reliance on global infrastructure, the high exposure of EU operators to certain third countries, and the increasing complexity and proliferation of international sanctions. Another round of public consultations will be held if the European Commission decides to publish a proposal for a regulation amending the EU Blocking Statute, which is planned for the second quarter of 2022.

  • EU (Guidance on COVID-19 humanitarian aid under EU sanctions) – On 13 August 2021, the European Commission published a Guidance Note on the provision of humanitarian aid to fight the COVID-19 pandemic in environments subject to EU restrictive measures (“Guidance Note”). Multiple EU sanction regimes include explicit exemptions (derogations) which allow for otherwise restricted actions. The Guidance Note clarifies that it is for the humanitarian operators to prove to the relevant national competent authority (“NCA”) that the conditions of the exceptions are fulfilled. NCAs are expected to provide the necessary guidance on how to obtain humanitarian derogations and are expected to establish a contact point for humanitarian exemptions related to the COVID-19 pandemic. BenninkAmar will closely monitor any further national developments in this regard.

  • France / Germany / UK (E3 statement on JCPOA) – On 19 August 2021, the governments of France, Germany and the UK expressed serious concerns over the fact that Iran nearly doubled its production capacity to enrich uranium to weapons-grade. The atomic agency IAEA confirmed that Iran is currently producing uranium metal enriched up to 20% for the first time and significantly increased its production capacity of uranium to a purity of 60%, while a purity of 90% is considered weapons-grade. This would amount, to a violation of Iran’s obligations under the Iran Nuclear Agreement of 2015, known as the Joint Comprehensive Plan of Action (“JCPOA”). Pursuant to the JCPOA, nuclear-related economic and financial EU sanctions against Iran will be lifted when Iran eliminates its stockpile of low- and medium-enriched uranium and reduces the number of its gas centrifuges used for uranium enrichment. In 2018, former US President Donald Trump already decided to unilaterally withdraw from the JCPOA. Additionally, the US (re)imposed stringent sanctions against Iran. In response, Iran started to exceed some of the nuclear limits in 2019. In the spring of 2021, negotiations for Iran to return to the JCPOA agreements in exchange for lifting of international sanctions were paused, because parties could not resolve some difficult matters. The governments of France, Germany, and the UK consider Iran’s behaviour to be alarming since they believe Iran has no credible civilian need for uranium enrichment activities, and because Iran has still not committed to a date for further resumption of negotiations.

b. United Kingdom

  • Canada, UK, US / Belarus (New set of sanctions)- On 9 August 2021, Canada, the UK and the US imposed further sanctions on the Belarusian regime in light of the anniversary of the fraudulent presidential elections in 2020. Restrictive measures taken by the international community are intended to bring about a change in the policy and activity of the Belarusian regime, which violently represses the civil society and seriously violates human rights. The targeted sectors include, amongst others, transferrable securities and money market instruments, insurance and reinsurance, debt financing, petroleum products and cigarette manufacturing. This new round of restrictive measures follows as a response to inter alia the detention of journalists Roman Protasevich and Sofia Sapega after the diversion of Ryanair flight FR4978, which constituted a serious threat to international civil air travel and amounted to a grave human rights violation of those involved. The US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) stated that this latest batch of designations represents the largest adopted set of Belarus-related sanctions to date; OFAC designated 23 individuals and 21 entities that provide previously sanctioned president Lukashenko with funds for his corrupt regime and his inner circle. Entities targeted by the newly imposed sanctions include, amongst others, energy sector companies BelKazTrans and Novopolotsk Limited Liability Company Interservice, which are (in)directly owned or controlled by Belarusian oligarch Mikalai Varabei, who has close ties with Lukashenko. To sum up, a large range of companies doing business in Belarus will be affected by this new tightening of restrictive measures.

3. United States of America

  • US / Iran (Sanctions against ‘oil-smuggling network’) – On 13 August 2021, OFAC designated several individuals and businesses pursuant to Executive Order 13224 for allegedly being involved in an international oil smuggling network that supports Iran’s Islamic Revolutionary Guard Corps-Qods Force (“IRGC-QF”). The restrictive measures adopted by OFAC target Omani businessman Mahmood Rashid Amur Al Habsi, who according to OFAC partnered with senior IRGC-QF officials and used companies in Oman, Liberia and Romania to facilitate shipments of Iranian oil to foreign customers. Besides prohibiting US persons from engaging in transactions with the designated entities, the measures also include so-called secondary sanctions. Secondary sanctions impose restrictions on third country actors, not subject to the sanctioning country´s legal jurisdiction (e.g. US). This means foreign financial institutions that knowingly facilitate (significant) transactions for the persons designated, risk losing access to the US financial system or risk having their (interests in) property under US jurisdiction blocked. While the new sanctions enter into force today, the US administration says it is seeking a return to the 2015 JCPOA. However, as mentioned earlier in this newsletter, recent rounds of negotiations in Vienna have failed to revitalise the JCPOA. Consequently, OFAC’s designation of Al Hasbi might be an indication that the US administration will not back down from taking further restrictive measures while negotiations drag on.

  • US / China (Penalty on violation of Export Administration Regulation) – On 16 August 2021, the U.S. Department of Commerce’s Bureau of Industry and Security(“BIS”) has reached a Settlement Agreement with semiconductor supplier Dynatex International over alleged violations of the Export Administration Regulations (“EAR”). According to BIS, between 2015 and 2020, Dynatex International conspired with others to export semiconductor manufacturing equipment to various companies located in China that were at the time listed on the Entity List. BIS concluded that Dynatex International knowingly exported products to the designated entities without a required licence, thereby violating Section 764.2(d) of the EAR. The Settlement Agreement amounts to USD 469.060.

4. Around the globe

  • Afghanistan –  On 15 August 2021, Taliban fighters rapidly seized control over Afghanistan’s capital Kabul. This was preceded by the indication in April 2021 that the US would completely withdraw its remaining troops from Afghanistan by September 11, 2021, after nearly 20 years of missions. While US and other Western troops left Afghanistan, the Taliban gained more ground throughout the country. The Secretary-General of the UN urged the international community to “stand as one”, while the world is following the current events in Afghanistan, including the latest attacks by IS on the airport of Kabul. The use of economic sanctions is one of the only viable means of pressure the international community seems to have at its disposal against these militant groups that have suddenly regained (political) control over Afghanistan and attack specific targets in the country. Bloomberg reported on 18 August 2021 that the US has already frozen billions of US dollars’ worth of Afghanistan government reserves held in US bank accounts. Additionally, on 18 August 2021, the UK Department of Trade’s Export Control Joint Unit (“ECJU”) removed Afghanistan as a ‘permitted destination’ from five open general export licenses. Consequently, businesses that export certain dual-use items from the UK to Afghanistan are no longer permitted to make use of open general export licenses. Instead of using those affected licenses to export to Afghanistan, businesses must apply for a standard individual license. And although the Taliban is, as many similar organizations, not specifically listed on any UN Sanctions regime, they do remain sanctioned through the UN Security Resolution 1267 from 1999. BenninkAmar is closely following the current developments in Afghanistan and the legal implications of the restrictive measures that have already been or are being taken by the international community.


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