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On October 1st—the first day of National Cybersecurity Awareness Month—the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) warned companies working with victims of ransomware attacks of potential sanctions for facilitating ransomware payments. Ransomware attacks have increased during the COVID-19 pandemic and the resulting shift to remote operations as cyber actors target online systems companies rely on to conduct business. The guidance provides a timely warning to cyber insurers, digital forensics, and financial services institutions that payment of a ransom to a sanctioned jurisdiction or individual may be a violation of OFAC regulations and federal law which could result in sanctions.
As a part of its sanctions program, OFAC has a database of designated malicious cyber actors, including perpetrators of ransomware attacks and facilitators of ransomware transactions, and imposes sanctions on those “who materially assist, sponsor, or provide financial, material, or technological support for these activities.” Pursuant to the International Emergency Economic Powers Act and the Trading with the Enemy Act, individuals and entities are prohibited from engaging in direct or indirect transactions with those on OFAC’s Specially Designated Nationals and Blocked Persons List, in addition to other blocked persons, and those covered by a national or regional embargo. OFAC may impose civil penalties for violating these federal laws irrespective of whether it was known or there was even a reason to know it was engaging in a transaction with a prohibited individual, entity, or jurisdiction.
The sanctions are intended to target and temper the proliferation of ransomware attack payments, which implicate significant national security concerns. Payments made to sanctioned persons or jurisdictions could be used to fund activities adverse to American interests and policy objectives. Payments may also encourage cyber actors to continue to engage in these attacks. In addition to the national security nexus, OFAC observed that payments are no guarantee that access to stolen data will be restored to the ransomware attack victim.
Companies working with ransomware attack victims should account for the sanctions risks associated with ransomware payments and implement a risk-based compliance program incorporating the following five components: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training. Victims and companies involved in responding to ransomware attacks should also report attacks to OFAC and law enforcement and are encouraged to cooperate with law enforcement before and after the attack. Financial companies responsible for facilitating ransomware payments should determine whether filing a Suspicious Activity Report (SAR) with FinCEN is proper or required.
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