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US Treasury Imposes Sanctions On Ukraine And Nauru

by Mike Godfrey, Tax-News.com, New York

24 December 2002


The US announced at the end of last week that it is to take action against the Ukraine and Nauru for their failure to control money-laundering and terrorist financing under Section 311 of the USA PATRIOT ACT. This is the first time that the Act has been used in this way.

Said Deputy Treasury Secretary Kenneth Dam: "With our designations today under Section 311, we are signaling to the world that we are serious about ensuring that the international financial system is safeguarded against the threat of money laundering. Our words have meaning and our actions have real teeth: these jurisdictions are bad for business, and US institutions now must recognize this fact."

“We are telling the world clearly that these jurisdictions . . . . financial controls cannot be trusted. We are serious about ensuring that the international financial system not be abused by money launderers, terrorist financiers, and other criminals."

"Our use of Section 311 today to designate two jurisdictions as "primary money laundering concerns" is yet another tool that we are using to ensure the international financial system is not abused by criminals. The world stands on notice: these jurisdictions do not take the fight against money laundering and financial crime seriously."

Section 311 (31 U.S.C. 5318A) authorizes the Treasury to designate a foreign jurisdiction, financial institution, class of transactions, or type of account as being of “primary money laundering concern,” and to impose one or more of five “special measures.”

Four of the special measures impose information-gathering and record-keeping requirements upon those US financial institutions dealing either directly with the jurisdiction designated as one of primary money laundering concern, or dealing with those having direct dealings with the designated jurisdiction. Under the fifth special measure, a US financial institution may be prohibited from opening or maintaining in the US a correspondent account or a payable-through account for a foreign financial institution if the account involves the designee.

As regards the Ukraine, it was designated as being of “primary money laundering concern” on December 20, 2002. The Treasury intends to impose requirements on US financial institutions based on Special Measures 1 – 4, and is soliciting comments from US financial institutions regarding the parameters of the proposed special measure.

Nauru was also designated as being of “primary money laundering concern” on December 20, 2002. The Treasury intends to impose Special Measure 5, which will prohibit US financial institutions from opening or maintaining correspondent accounts with Nauru-licensed financial institutions.


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