Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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9/15/2006 OFAC Designations Often Respected by Foreign Institutions, Director Notes

In his first public appearance as the Director of OFAC, Adam J. Szubin told the Senate Committee on Banking, Housing and Urban Affairs that, even when terrorist financial supporters are not added by the United Nations 1267 Sanctions Committee to the UN’s designation list, just being on OFAC’s SDN list can have a significant effect on individuals and organizations with no U.S. assets. The Director noted the designated party may try to make an international transfer where a U.S. financial institution serves as an intermediary, allowing the assets to be blocked at the point of U.S. contact. Also, many foreign institutions implement U.S. sanctions voluntarily, even when under no legal obligation from their host countries to do so. This may occur because an institution does not want to deal with terrorists or their supporters, because of concerns about the reputational risk that may follow from providing services to such individuals and entities, or from fear of litigation or other consequences. The Director noted that Iranian banks have been allowed access to the U.S. financial system indirectly, through third-country intermediaries, but that the agency recently cut off Iran’s Bank Saderat from even indirect access to the U.S. financial system because the bank has been “a significant facilitator of Hizballah's financial activities and has served as a conduit between the Government of Iran and a range of terrorist groups, including Hizballah, Hamas, the Popular Front for the Liberation of Palestine-General Command (PFLP-GC), and the Palestinian Islamic Jihad (PIJ).”

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