A Guide to Anti-Money Laundering for Crypto Firms
On June 17, 2020, the US Caesar Syria Civilian Protection Act of 2019 took effect. This new set of sanctions significantly targets not only Syrian entities and persons but also non-Syrian governments, companies and individuals who may intend to financially engage with the al-Assad government in Damascus.
Named after the pseudonym used by a Syrian official who leaked thousands of photographs evidencing torture in government prisons, the aim of the Caesar Act is to create a chilling effect on efforts to financially rebuild the war-torn country until human rights violations cease and the regime engages in meaningful negotiations with its opponents. It seeks to delegitimize the efforts being spearheaded by the Russian government to legitimize the Assad regime and integrate it with elements of the international community.
This seems to be just the beginning too: the US Department of State asserts that they “anticipate many more sanctions” and “will not stop until Assad and his regime stop their needless, brutal war against the Syrian people and the Syrian government agrees to a political solution.”
While Syria already remains under an array of direct and crushing economic sanctions by both the US and the EU, by widening the sanctions net to cover foreign business and institutions, including those in Russia, eastern Europe, Lebanon, Iran and the Gulf who have expressed growing interest in seeking opportunities afforded by the Syrian reconstruction program, the US hopes to add significantly to the pressure that is currently driving the Syrian economy into a precipitous downward spiral.
Estimates of the cost of rebuilding Syria go as high as 1 trillion USD, and Russia hopes that third parties will step up to foot the bill. Attractive reconstruction deals are on offer, but the Caesar Act, by focusing on the punishment of these economic suitors, aims to prevent any normalization.
The new sanctions are sectorial in nature — in form, not too dissimilar from the type of sanctions targeting Russia in the wake of its invasion of Ukraine — and focus on the oil and natural gas, military aircraft, construction and engineering sectors of the Syrian economy. Any party that provides support to these sectors will find themselves subject to US sanctions.
Specifically, 180 days after the enactment of the Caesar Act, the US President will, inter alia, impose sanctions on foreign persons if they are determined to have knowingly provided “significant financial, material, or technological support to, or knowingly engages in a significant transaction with” the following:
- the Government of Syria (including any entity owned or controlled by the Government of Syria) or a senior political figure of the Government of Syria;
- a foreign person that is a military contractor, mercenary, or a paramilitary force knowingly operating in a military capacity inside Syria for or on behalf of the Government of Syria, the Government of the Russian Federation, or the Government of Iran; or
- a foreign person subject to sanctions pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) with respect to Syria or any other provision of law that imposes sanctions with respect to Syria.
In addition, that foreign person may be sanctioned if it:
- knowingly sells or provides significant goods, services, technology, information, or other support that significantly facilitates the maintenance or expansion of the Government of Syria’s domestic production of natural gas, petroleum, or petroleum products;
- knowingly sells or provides aircraft or spare aircraft parts that are used for military purposes in Syria for or on behalf of the Government of Syria to any foreign person operating in an area directly or indirectly controlled by the Government of Syria or foreign forces associated with the Government of Syria;
- knowingly provides significant goods or services associated with the operation of aircraft that are used for military purposes in Syria for or on behalf of the Government of Syria to any foreign person operating in [specified areas]; or
- knowingly, directly or indirectly, provides significant construction or engineering services to the Government of Syria.
The Caesar Act makes clear that financial support includes “the provision of loans, credits, or export credits.”
Sanctions to be imposed on foreign persons engaged in these activities include:
- the blocking and prohibition of all transactions in property and interests in property of the foreign person if such property and interests in property are in the United States, come within the United States, or are or come within the possession or control of a United States person; and
- Ineligibility to receive a visa to enter the United States and the possibility of having a visa revoked.
The Syrian Central Bank
The Act also requires that the Trump administration, not later than 180 days after the enactment of the Caesar Act, determine whether there are reasonable grounds for concluding that the Central Bank of Syria is an entity of “primary money laundering concern” according to Section 311 of the USA PATRIOT ACT. Such a designation may have the effect of impacting upon non-US entities and individuals, as the resulting adoption of special measures may focus on relevant foreign bank correspondent accounts and also payable through accounts.
The Caesar Act sets out the conditions that will lead to its suspension. These include:
- The suspension the Syrian and Russian air campaigns, including the deliberate targeting of civilians and civilian structures;
- Allowing unimpeded humanitarian access to areas under the regime and Russian control;
- The release of political prisoners;
- Compliance with WMD;
- Helping the return of refugees; and
- Setting up a reconciliation process.
While these measures may halt Syria’s reconstruction efforts, it is unlikely they will deter the Assad regime from continuing to prosecute its war, which must now be entering its final stage. Whatever the case, foreign institutions will need to ensure that they are not indirectly dealing with parties who may be involved in activities covered by the Caesar Act. Sanctions and compliance teams will need to give added scrutiny to any dealings that may potentially involve activities related to the reconstruction of Syria.
Sources: The National Defense Authorization Act for Fiscal Year 2020, Syria Caesar Act Designations: Press Statement from Secretary of State Michael Pompeo.
Originally published June 17, 2020, updated November 17, 2021
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