On April 15, OFAC issued the Hizballah Financial Sanctions Regulations (HFSR) pursuant to the Hizballah International Financing Prevention Act of 2015. The regulations are intended to disrupt Hizballah's global logistics and financial networks by imposing sanctions on foreign financial institutions that engage in prohibited transactions connected to Hizballah. When invoked, the sanctions would prohibit, or significantly limit, the ability for U.S. financial institutions to open or maintain correspondent or payable through accounts on behalf of the foreign financial institution in the United States.
Notable features of the regulations include:
- a broad definition of "financial institution," which includes not only banks, exchange houses, investment companies and branches of foreign financial institutions in the United States, but also any "dealer in precious metals, stones, or jewels," as well as any "business engaged in vehicle sales, including automobile, airplane, and boat sales"
- restrictions on both opening and maintaining accounts for foreign financial institutions, which may expose U.S. financial institutions to penalties for failing to timely close an account affected by the sanctions
- a broad restriction on activities conducted "in any location or currency"; accordingly, foreign financial institutions must ensure that none of their activities globally (not just those that touch the United States or involve the U.S. dollar) run afoul of the HFSR
- civil penalties for U.S. financial institutions of $250,000 or twice the transaction value, as well as criminal penalties of $1 million and/or 20 years of imprisonment per violation.
For additional information, see the OFAC Final Rule implementing the HFSR and discussion in the Akin Gump Client Alert.
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