Note: there is also an Annex of “Relevant Reports and Guidance”. However, I am unable to copy it effectively here because of how it is formatted. Please see the Advisory here – the Annex is on pages 12-13.
IV. Due Diligence, Relevant Federal Authorities, and Additional Matters
a. Financial Institutions’ AML/CFT Obligations
Entities with ties to the U.S. financial system should be aware that U.S. financial institutions8 are required to comply with the Bank Secrecy Act (BSA), administered by the Financial Crimes Enforcement Network (FinCEN). BSA requirements generally include establishing AML programs, filing currency transaction reports, and reporting suspicious activity. The reporting generated by these obligations is essential to detecting, investigating, and deterring criminal activity, including human trafficking, conservation crimes, and drug trafficking. U.S. financial institutions are expected to take a risk-based approach to identify, assess, and mitigate their money laundering and terrorist financing risks. As with all their risks, financial institutions should assess their potential exposure to the risk of handling the proceeds of forced labor, wildlife trafficking, and drug trafficking on behalf of their clients and, as appropriate, implement a mitigation process that aligns with that risk, consistent with their BSA requirements. A financial institution may ask its customers—including customers engaged in business with Cambodia—for additional information to establish a risk profile and understand the nature of the customer relationship.
For further information, financial institutions should refer to FinCEN-issued regulations, advisories, and guidance as to their obligations under the BSA. Financial institutions may face civil enforcement as well as potential criminal penalties if they fail to comply with their BSA obligations.
U.S. financial institutions also are expected to comply with law enforcement processes, such as subpoenas, seeking to identify traffickers’ assets, which can be seized, forfeited, and in human trafficking cases, used toward restitution.
b. Due Diligence Related to Trafficking in Persons, and Wildlife and Timber Trafficking
Businesses, including financial institutions, with exposure to entities involved in trafficking in persons, and to wildlife and timber trafficking in Cambodia should consider the reputational, economic, and legal risks, and conduct due diligence into their supply chains.
Businesses can review existing due diligence on supply chains linked to these activities in Cambodia, including supply chain mapping and traceability efforts to determine the extent to which any of their product supply chains may involve these commodities.
The U.S. Department of Labor’s Comply Chain provides information on due diligence measures specific to forced labor in supply chains.
The U.S. Department of State’s Responsible Sourcing Tool (www.ResponsibleSourcingTool.org) includes an in-depth examination of 11 key sectors and 43 commodities at risk for human trafficking or trafficking-related practices, as well as 10 comprehensive risk-management tools.
The Human Trafficking Prosecution Unit of the Department of Justice’s Civil Rights Division works with federal law enforcement agencies to prosecute trafficking in persons, including forced labor cases.
The Financial Action Task Force (FATF) has released two reports on the links between conservation crimes, corruption, drug trafficking, human rights abuses such as human trafficking and forced labor, and money laundering. This work raises awareness about the risks and illicit finance of these activities, financial indicators of potential suspicious activity, and how the financial system and designated non-financial business and professions are being used.
c. Federal Acquisition Regulation, Combating Trafficking in Persons (FAR 52.222-50)
Pursuant to the Federal Acquisition Regulation, Combating Trafficking in Persons (FAR 52.222-50), U.S. government contractors, contractor employees, sub-contractors, sub- contractor employees, and their agents are prohibited from engaging in severe forms of trafficking in persons, including sex trafficking, or using forced labor, as well as a range of trafficking-related activities. If a contractor is found to be in violation of the FAR, the contracting agency can impose a range of remedies including, but not limited to, suspension and debarment.
d. The Trafficking Victims Protection Act’s Crimes of Forced Labor and Trafficking with Respect to Forced Labor, and a Civil Remedy (18 U.S.C. Sections 1589, 1590, 1591, and 1595)
U.S. law criminalizes not just knowingly providing or obtaining the labor or services of a person by any of the prohibited means, but also criminalizes knowingly benefitting financially, or receiving anything of value, from participation in a venture that has engaged in obtaining or providing labor or services of a person by any of the prohibited means, knowing or in reckless disregard of the fact that the venture had engaged in providing or obtaining labor or services by any such means. U.S. law imposes criminal liability on U.S. defendants even when the forced labor occurs in another country. Companies charged with criminal violations could face up to $500,000 USD in fines and executives or other company employees involved may face up to 20 years of imprisonment if the elements of the offense are proven beyond a reasonable doubt. U.S. law also imposes civil liability through a private right of action in federal courts if a preponderance of evidence shows that the individual or entity benefitted from participating in a venture that it knew or “should have known” was engaged in forced labor or other enumerated crimes.
e. U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC)
Among OFAC’s various sanctions authorities, Executive Order (E.O.) 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act, gives the Secretary of the Treasury, in consultation with the Secretary of State and the Attorney General, the authority to impose economic sanctions on foreign persons in connection with serious human rights abuse and/or public corruption. Some available bases for designation include being:
• a foreign person who is a current or former government official, or a person acting for or on behalf of such an official, who is responsible for or complicit in, or has directly or indirectly engaged in:
(1) corruption, including the misappropriation of state assets, the expropriation of private assets for personal gain, corruption related to government contracts or the extraction of natural resources, or bribery; or
(2) the transfer or the facilitation of the transfer of the proceeds of corruption.
• a foreign person who is or has been a leader or official of an entity, including any government entity, that has engaged in, or whose members have engaged in, any of the foregoing activities relating to the leader’s or official’s tenure;
• a person who has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, among other things, those persons already sanctioned under E.O. 13818.
Please see E.O. 13818 for all designation criteria.
Unless authorized by a general or specific license issued by OFAC or otherwise exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons. U.S. persons or others over which OFAC exercises jurisdiction can face significant monetary penalties for conduct in violation of OFAC’s regulations. OFAC has designated multiple entities and individuals in connection with corruption in Cambodia. For more details on OFAC’s Global Magnitsky sanctions program, click here.
f. The U.S. Department of the Treasury’s Bank Secrecy Act (BSA) Regulations
The Currency and Foreign Transactions Reporting Act of 1970 (which is commonly referred to as the “Bank Secrecy Act” or “BSA”) requires certain financial institutions to assist the USG in detecting and preventing money laundering. Specifically, the BSA requires certain financial institutions to, among other things, establish and maintain an anti- money-laundering program; keep records of cash purchases of negotiable instruments; file reports of cash transactions exceeding $10,000 (daily aggregate amount); and report suspicious activity that might signify money laundering, tax evasion, or other criminal activities, including forced labor. The BSA is sometimes referred to as an “anti-money laundering” law (“AML”) or jointly as “BSA/AML.”
g. U.S. Department of Commerce’s Bureau of Industry and Security (BIS)
BIS maintains export controls upon exports and reexports to Cambodia of items subject to the Export Administration Regulations (EAR) that are identified on various multilateral export control regime lists. BIS also maintains certain unilateral controls concerning countries in the region that commit human rights abuses and suppress democracy. Those unilateral controls necessitate caution regarding re-exports of items subject to the EAR from Cambodia to parties in Burma and China that are subject to military or military intelligence end-user or end-use controls, and parties that appear on the BIS Entity List. Reexports from Cambodia to these parties require BIS authorization as set forth in Part 744 of the EAR.
BIS investigates violations of the EAR, such as the export and reexport of items subject to the EAR to Cambodia without the required BIS licenses. BIS may act against any person (individual or entity) regardless of nationality or location, in connection with a violation of the EAR. As set forth in the Export Control Reform Act of 2018, 50 U.S.C. §§ 4801-4852, criminal penalties may include up to 20 years of imprisonment and up to $1 million in fines per violation, or both. Administrative monetary penalties may currently reach up to $311,562 per violation or twice the value of the underlying transaction, whichever is greater. In general, the administrative monetary penalty maximum is adjusted for inflation annually. However, BIS may also seek a denial of export privileges for violations of the EAR. To discuss or disclose a violation of sanctions administered by BIS, please send an electronic transmission to BIS_VSD_INTAKE@bis.doc.gov. In order to discuss or disclose a potential violation, please use the BIS Confidential Enforcement Lead Form, or call the hotline at 1- 800-424-2980. To submit a request to BIS for a license, please see https://www.bis.doc.gov/index.php/licensing/simplified-network-application-process- redesign-snap-r.