Banks and FinTechs Beware: Here Come the Sanctions

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Banks and FinTechs Beware: Here Come the Sanctions

What We Can Learn from Previous OFAC Actions Involving FinTech Companies

By Dowse Bradwell “Brad” Rustin, IVCraig NazzaroRichard B. Levin

With Russia’s invasion of Ukraine last week, we saw a swift response by the U.S. beginning with President Biden’s Executive Order 14024 (“The EO”) and followed quickly by the Office of Foreign Assets Control’s (“OFAC”) severe restrictions on economic activity related to the Russian Federation. In total, the U.S. Treasury expects these sanctions to impact nearly eighty percent of the Russian Federation’s economy. On February 25, 2020, these programs were broadened to include political leaders of the Russian Federation, including Vladimir Putin (“President”) and Sergei Lavrov (“Minister of Foreign Affairs”), amongst others.

Summary of Impact on Banks and FinTech Companies

These changes pose a significant regulatory risk to U.S. financial institutions and FinTech companies. While an entity’s strong Bank Secrecy Act (“BSA”), anti-money laundering (“AML”) compliance program, and Office of Foreign Asset Control (“OFAC”) sanctions program should digest be able to address these new sanctions, the controls around your third-party due diligence and FinTech partnership program oversight most likely did not anticipate such a large-scale change to the regulatory landscape with a developed country that is extremely active in the payments, digital assets, and FinTech spaces.

It is extremely important that financial institutions and FinTech companies immediately review their BSA and AML compliance and OFAC screening policies and procedures to ensure implementation of these sanction regimes. In addition, this is an opportunity for financial institutions to assess their (and their FinTech partners’) compliance management programs and ability to integrate these sanctions programs and quickly deploy controls. As explained more fully below, you should immediately review your company’s:

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