Europe: UK Sanctions Regulator Highlights Compliance Failures
On 13 February 2025, the UK’s Office of Financial Sanctions Implementation (OFSI) published an assessment of suspected sanctions breaches involving UK financial services firms since February 2022. It highlights three areas of concern:
Compliance
OFSI has identified several common issues that contribute to non-compliance by UK financial institutions:
Improper maintenance of frozen assets, particularly in relation to debits from accounts held by sanctioned persons (DPs);
Breaches of specific and general OFSI license conditions;
Inaccurate ownership assessments; and
Inaccurate UK nexus assessments.
Russian DPs and Enablers
Professional and non-professional enablers have been increasingly providing the following services on behalf of Russian DPs:
Maintaining the lifestyles and assets of DPs;
Attempting to front on behalf of DPs to claim ownership of frozen assets; and
Employing increasingly sophisticated measures to evade UK financial sanctions prohibitions, particularly through the exploitation of crypto-assets.
Indicators of enablers might include:
Individuals associated with DPs receiving funds of significant value;
Regular payments between companies controlled or owned by DPs;
New individuals making payments formerly made by a DP;
Discrepancies in name spellings or transliterations (esp. from Cyrillic);
Recently obtained non-Russian citizenships; and
Frequent name changes.
Intermediary Countries
Suspected breaches of UK financial sanctions prohibitions by Russian DPs often involve intermediary jurisdictions including Austria, British Virgin Islands, the Cayman Islands, Cyprus, Guernsey, Isle of Man, Luxembourg, Switzerland, Turkey, and United Arab Emirates. The assessment includes a non-exhaustive list of suspicious activities that the OFSI has observed in several of these countries.
Conclusion
Financial institutions need to adopt a proactive approach to avoid their services being exploited as instruments of evasions and in turn avoid financial and reputational repercussions of non-compliance.
For further information, please see our corresponding alert.
MAKING SMART TCPA MOVES: Rocket Mortgage Follows Up Its Redfin Purchase With STUNNING $9.4BB Take Over of Mr. Cooper
So multiple outlets are reporting that Rocket is set to absorb the nation’s largest mortgage servicer Mr. Cooper.
With Rocket having just recently acquired Redfin it looks like the company is poised to be an absolute behemoth in the mortgage industry.
Just like with Redfin, however, the TCPA is likely driving this initiative.
Yes, mortgage servicing can be profitable in its own right but it is MASSIVELY valuable to an originator to have a large servicing pool.
Why?
Who is more likely to NEED mortgage or refinance than folks who already have a mortgage product? And with trigger leads now widely available (probably illegal under FCRA but don’t tell the CRAs that) having a massive servicing book means you can LEGALLY call folks who just submitted an application elsewhere and convince them to stay.
This is because the DNC rules will soon allow Rocket to call all of the MILLIONS of Mr. Cooper customers it just acquired WITHOUT CONSENT.
Pretty slick, eh?
So with Redfin providing consent on the front end and with access to a massive pool of mortgage customers now bolted on to the backend Rocket can make ready use of the phones to bring customers into its ecosystem–and keep them there.
Pretty clever. And it was all brought to you by the TCPA.
People think of the statute as a profit killer. But leveraged correctly it can actually drive profits by building a moat around your customers and a barrier-to-entry for others in your vertical.
Smart money uses the law as a competitive advantage. Nicely done Rocket.
Implications of New “Secondary Tariff” Executive Order Targeting Importers of Venezuelan Oil
On 24 March 2025, the White House issued an Executive Order threatening to impose a 25% tariff on all goods imported into the US from any country that imports Venezuelan oil directly or indirectly through third parties. Effective on or after 2 April 2025, the tariff is in response to alleged actions of Venezuela’s Maduro government, in particular sending members of the Tren de Aragua gang (designated a foreign terrorist organization) and other criminals into the US and its involvement in kidnapping and violent attacks including the assassination of a Venezuelan opposition figure.
The 25% tariff—called a “secondary tariff” as it is analogous to “secondary sanctions” asserted against non-US entities for doing business with sanctioned parties and countries—will apply to “any country that imports Venezuelan oil, directly or indirectly, on or after 2 April 2025” as determined by the Secretary of State in consultation with the Secretaries of the Treasury, Commerce, and Homeland Security, and the US Trade Representative. Once imposed, the tariff would expire one year after a country ceases Venezuelan oil imports or earlier at the discretion of US officials. For countries already subject to other comprehensive import tariffs, the 25% tariff would be cumulative, so China, for example, could be subject to a 45% import duty including the 20% tariff that already applies.
The Order raises several questions, including the scope of products and transactions covered. “Venezuelan oil” is defined as “crude oil or petroleum products extracted, refined, or exported from Venezuela” regardless of the nationality of entities involved, and “indirectly” is defined to include purchases through intermediaries or third countries “where the origin of the oil can reasonably be traced to Venezuela.” This will put significant pressure to conduct and confirm the origin of petroleum products traded on the international market as a limited volume could trigger the tariffs. The Order also leaves the fate of refined and derivative products made from Venezuelan crude oil uncertain, suggesting that further processing and refinement in another country may still be subject to restriction. It is also unclear how Venezuelan oil commingled with oil from other countries would be treated. Presumably, such commingling would be assessed in the same manner as oil from embargoed countries under US sanctions regimes, where even a small amount of commingled product can taint an entire shipment. The Order leaves to Commerce responsibility to issue guidance on implementation of the measure.
Over half of Venezuelan oil exports are imported into China, with significant volumes purchased by France, India, Italy, and Spain under limited US authorizations that were previously granted. The tariff threat will lead to significant disruptions in these markets. The threat could also impact oil traders, shipping companies, and operators of storage facilities, with significant oil volumes becoming stranded without a viable buyer.
D.C. Circuit Rules Trump Can Remove Independent Agency Members Without Cause
On March 28, 2025, the U.S. Court of Appeals for the District of Columbia Circuit ruled that President Donald Trump likely has the authority to remove National Labor Relations Board (NLRB) member Gwynne Wilcox and Merit Systems Protections Board (MSPB) member Cathy Harris without cause.
Quick Hits
The D.C. Circuit Court ruled that President Trump likely has the authority to remove NLRB member Gwynne Wilcox and MSPB member Cathy Harris without cause, staying previous reinstatement orders from lower courts.
The ruling leaves the NLRB and MSPB without enough members to hear cases.
The decision addresses significant constitutional questions regarding the president’s power to remove members of independent agencies, boards, and commissions and Congress’s authority to restrict removal.
In a split decision, the D.C. Circuit stayed two rulings by federal district courts in Washington, D.C., that had reinstated NLRB member Wilcox and MSPB member Harris to their respective independent agencies. President Trump had removed Wilcox and Harris, both democratic appointees, earlier this year, leading them to file legal challenges.
Writing separate concurring opinions, Circuit Judges Justin R. Walker and Karen LeCraft Henderson found that the government was likely to succeed on the merits that the president, as the head of the executive branch, has the authority to remove members of both the NLRB and MSPB because the agencies wield “substantial executive power.”
“The forcible reinstatement of a presidentially removed principal officer disenfranchises voters by hampering the President’s ability to govern during the four short years the people have assigned him the solemn duty of leading the executive branch,” Judge Walker wrote in his concurring opinion.
While Judge Henderson agreed “with many of the general principles in Judge Walker’s opinion about the contours of presidential power under Article II of the Constitution,” she concluded “the government’s likelihood of success on the merits [was] a slightly closer call.” Additionally, she emphasized that the government had clearly shown that it would face irreparable harm if the stays were not issued.
The stays prevent Wilcox and Harris from serving as members of the NLRB and MSPB, leaving each of their agencies without a quorum to hear cases. The NLRB is a five-member board created by the National Labor Relations Act that enforces labor law through representation and unfair labor practice cases. The MSPB is a three-member bipartisan board adjudicating personnel and merit systems issues involving federal employees.
Circuit Judge Patricia Millett, issued a separate dissenting opinion sharply criticizing the appeals court for granting the stays and stripping the agencies of their quora that the district court orders had maintained, “leav[ing] languishing hundreds of unresolved legal claims.”
The Wilcox and Harris cases have raised fundamental constitutional and separation of powers questions over the president’s authority to remove members of independent agencies, boards, and commissions and Congress’s authority to restrict removal. The Trump administration has argued that provisions limiting the president’s removal power are unconstitutional and infringe the president’s authority as the executive.
However, a 1935 decision by the Supreme Court of the United States, in Humphrey’s Executor v. United States, upheld restrictions on the president’s authority to remove officers of certain types of independent agencies—in that case, a commissioner of the Federal Trade Commission.
Next Steps
The D.C. Circuit’s ruling supports the president’s ability to remove the governing members of independent agencies without cause, allowing President Trump to move forward with efforts to reshape the NLRB and other agencies. However, the stays are not a final decision, and the litigation remains ongoing. Given the significant constitutional issues, the case could ultimately be resolved by the Supreme Court.
CFTC Unveils Replacement Penalty Mitigation Policy Focused on Self-Reporting, Cooperation, and Remediation
The Commodity Futures Trading Commission (CFTC), an independent U.S. government agency that regulates the U.S. derivatives markets, including futures, options, and swaps, has announced a new policy for mitigating potential penalties, potentially cutting them in half, based on the level of voluntary self-reporting, cooperation, and remediation of potential misconduct.
Quick Hits
The CFTC’s new policy allows companies to potentially reduce penalties by up to 55 percent through voluntary self-reporting, cooperation, and effective remediation of misconduct.
The policy introduces a matrix for mitigating penalties based on the level of voluntary self-reporting, ranging from “No Self-Report” to “Exemplary Self-Report,” and the level of cooperation, ranging from “No Cooperation” to “Exemplary Cooperation.”
The policy emphasizes a proactive approach, enabling companies to demonstrate good faith through cooperation and remediation efforts in enforcement actions.
On February 25, 2025, the CFTC’s Division of Enforcement issued a new advisory detailing how it will evaluate companies’ self-reporting, cooperation, and remediation and reduce penalties accordingly in enforcement actions.
The CFTC, through its Division of Enforcement, investigates violations of the Commodity Exchange Act (CEA) and the CFTC Regulations. Violations can be certain actions or behavior in connection with futures, options, and swaps and in connection for a contract of sale of any commodity in interstate commerce.
The CFTC’s new advisory replaces prior guidance with a new matrix that the Division of Enforcement will use to determine an appropriate reduction in penalties, or a “mitigation credit,” which can reach up to 55 percent of a possible penalty. The CFTC characterized the new guidance as a significant step toward transparency in enforcement actions.
“From the beginning, I have encouraged firms to self-report to proactively take ownership, ensure accountability, and prevent future violations,” Acting Chairman Caroline D. Pham said in a statement. “By making the CFTC’s expectations for self-reporting, cooperation, and remediation more clear—including a first-ever matrix for mitigation credit—this advisory creates meaningful incentives for firms to come forward and get cases resolved faster with reasonable penalties.”
Acting Chairman Pham further emphasized that the new program implements President Donald Trump’s EO 14219, “Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative,” which calls for streamlining federal government processes.
Three-Tiered Scale for Self-Reporting
The advisory outlines a three-tiered scale the CFTC Division of Enforcement will use to evaluate the “voluntariness” of self-reporting:
No Self-Report—The advisory states that this factor would apply when an organization has not self-reported in a timely manner, “no timely self-report,” or when a self-report was not “reasonably related to the potential violation or not reasonably designed to notify the Commission of the potential violation.”
Satisfactory Self-Report—This factor applies when there was notification of a potential violation to the Commission, but the notification lacked “all material information reasonably related to the potential violation that the reporting party knew at the time of the self-report.”
Exemplary Self-Report—This factor applies when a comprehensive notification includes all material information and additional information that assists with the investigation and conserves the agency’s resources.
According to the advisory, to receive full credit, disclosures must be (1) voluntary, (2) made to the Commission, (3) timely, and (4) complete. Reports can be made to the Division of Enforcement or other relevant CFTC divisions. The CFTC will provide a safe harbor for good faith self-reporting, allowing for corrections of any inaccuracies discovered post-reporting.
Cooperation and Remediation
Similarly, the advisory explains that the division will evaluate cooperation on a four-tiered scale:
No Cooperation: According to the advisory, the division will apply this factor in cases where there has been compliance with legal obligations but no substantial assistance.
Satisfactory Cooperation: This factor applies when documents, information, and witness interviews have been voluntarily provided.
Excellent Cooperation: This factor applies when there has been consistent, substantial assistance, including internal investigations and thorough analysis.
Exemplary Cooperation: This factor applies when there has been proactive engagement and significant resource allocation to assist the Division of Enforcement.
Additionally, according to the advisory, the division will consider remediation efforts as part of a company’s cooperation evaluation. Specifically, the division will assess whether substantial efforts were made to prevent future violations, including corrective actions and implementation of appropriate remediation plans. In some cases, a compliance monitor or consultant may be recommended to ensure the completion of undertakings.
Mitigation Credit Matrix
The advisory further introduces a “Mitigation Credit Matrix,” which explains a “mitigation credit” will be applied based on the levels of voluntariness and cooperation as a percentage of the initial civil monetary penalty. The matrix ranges from 0 percent for no self-report and no cooperation to 55 percent for exemplary self-report and exemplary cooperation. However, the division said it will retain discretion to deviate from the matrix based on each case’s unique facts and circumstances.
Next Steps
The advisory and Mitigation Credit Matrix provides more clarity and transparency about how the CFTC will evaluate voluntary self-reporting of potential misconduct and cooperation with subsequent CFTC enforcement actions, applying a new matrix that considers the levels of voluntariness and cooperation. Prior guidance had focused on whether an entity self-reported or not and whether cooperation “materially advanced” the division’s investigation.
Future enforcement and administration of the advisory will be necessary to clarify how the Trump administration will handle self-reporting and cooperation. Further, the CFTC has maintained discretion in applying the matrix and mitigation factors, and there is still some room for ambiguity in applying the factors. CFTC Commissioner Kristin N. Johnson dissented from the issuance of the new guidance. In a separate statement, Commissioner Johnson said that while she supports improvements to “transparency, clarity, and efficiency” processes to incentivize self-reporting, cooperation, and remediation, the CFTC “must be careful not to muddy the waters.”
The new advisory comes amid a broader push by federal enforcement agencies, including the CFTC, to encourage self-reporting and whistleblowing, at least under the Biden administration.
The advisory makes it clear it is now the division’s sole policy on self-reporting, cooperation, and remediation and explains that all previously announced policies, including those contained in six different division advisories as well as in the division’s enforcement manual, are no longer the policy of the division.
Thus far, no federal enforcement agencies have indicated their whistleblower protections will be weakened under the Trump administration.
CFTC-regulated businesses may want to review and update their compliance programs and related policies, considering the CFTC’s self-reporting, cooperation, and remediation incentive mechanisms. According to the advisory, entities must undergo an “exemplary self-report” and “exemplary cooperation” to maximize the potential for lowered penalties.
Moreover, entities regulated by other federal enforcement agencies may want to consider that the CFTC advisory could signal a revised approach generally under the Trump administration and keep a close watch on whether any modifications similar to those set forth in this advisory are adopted by other agencies.
Import-Tariffs: Acts of God or just another Thursday?
Many of us are quietly watching and waiting to see how newly imposed tariffs will affect the U.S. and global economy in the coming weeks, months, and potentially – years.[i] Anticipating these changes and protecting your transactions is going to be crucial, but what about deals that have already been negotiated and signed? Which party will bear the greater risks and burdens of tariff-related cost increases? There are several theories that may provide relief.
A widely used contract provision that will bear considerable scrutiny is the ‘Force Majeure Clause,’ which allows a party to avoid liability if it cannot fulfill its obligations due to circumstances beyond their control or unforeseen events.[ii] The motivator behind this provision is to protect parties against defined disasters, calamities, and acts (and wraths) of God.[iii] Numerous courts have considered such clauses, and many have declined to invoke the force majeure clause.
Kyocera Corp. v. Hemlock Semiconductor, LLC:
In 2015, the Michigan First District Court of Appeals considered this question in Kyocera Corp. v. Hemlock Semiconductor, LLC.[iv] This case arose in the midst of upheaval within the solar industry caused by tensions between the United States and China. Chinese companies began engaging in the process known as “large-scale dumping,” in which a foreign producer, perhaps with state support, sells a product at a price that is lower than its cost of production to intentionally manipulate an industry and capture market share. Global solar prices began to decline (including the price of polysilicon, a critical component used in solar panels), causing numerous manufacturers to go out of business. In response, the United States imposed anti-subsidy and anti-dumping import tariffs.[v]
Kyocera, a Japanese solar panel manufacturer, had previously entered into a ten year, take-or-pay supply contract with Hemlock Semiconductor, a Michigan based polysilicon manufacturer, to purchase its polysilicon. The very nature of a take-or-pay contract allocates the risk of a rise in prices to the seller (Hemlock) and a fall in prices to the buyer (Kyocera). Kyocera argued that purchasing polysilicon at this higher price would cause its “solar business to cease to exist.” Kyocera tried and failed to negotiate a satisfactory price change with Hemlock and ultimately provided Hemlock with notice that it was excused from performance under the contract’s force majeure clause.[vi]
The Michigan First District Court of Appeals was unsympathetic, finding that economic hardship and unprofitability alone, including increased costs due to tariffs, are insufficient to invoke force majeure unless explicitly covered by the clause. The risk of falling prices fell squarely on Kyocera under its contract, and Kyocera “opted” not to protect itself.[vii] The court refused to “manufacture a contractual limitation that it may in hindsight desire by broadly interpreting the force majeure clause to say something that it does not.”[viii]
Further, the court addressed the issue of foreseeability. The court rejected Kyocera’s argument that they did not foresee the illegal actions of the Chinese government, simply stating that “markets are volatile” and that the fact that “prices may rise and fall was known to both parties and such risk was precisely allocated by the take-or-pay nature of [a]greement.”[ix]
Kyocera is one of many cases illustrating that unless very carefully drafted to say otherwise, economic hardship and decreasing profits may not be enough for a court to intervene and apply the protections of a force majeure clause. Under these cases, the most that an aggrieved party may receive is more time to comply with its contractual obligations.
So, what type of language would a court consider explicit enough to apply the force majeure clause against tariffs? We will consider this issue in an upcoming post!
[i] See Robert McClelland et al., Tariffs, Trade, China, and the States, Tax Pol’y Ctr, Urb. Inst. & Brookings Inst. (Oct. 17, 2024), https://taxpolicycenter.org/briefs/tariffs-trade-china-and-states.
[ii] See Force Majeure, Legal Info. Inst., Cornell L. Sch., (last visited Mar. 26, 2023) https://www.law.cornell.edu/wex/force_majeure#:~:text=Force%20majeure%20is%20a%20provision,or%20both%20parties%20from%20performing.
[iii] See Mark Trowbridge, Acts of God and Other Force Majeure Events, Supply Chain Mgmt. Rev. (May 2, 2022), https://www.scmr.com/article/acts_of_god_and_other_force_majeure_events.
[iv] See Kyocera Corp. v. Hemlock Semiconductor, LLC, 886 N.W.2d 445 (Mich. Ct. App. 2015).
[v] See id. at 449.
[vi] See id. at 447, 450.
[vii] See id. at 453.
[viii] See Kyocera Corp, 886 N.W.2d at 453.
[ix] See id. at 452-53.
FTC Orders Fintech Company to Pay $17 Million for Allegedly Deceptive Subscription Practices
On March 27, the FTC announced that a fintech company offering cash advances through a mobile app has agreed to pay $17 million to resolve allegations that it violated the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA). The FTC alleged that the company misrepresented the availability and cost of its services and failed to obtain consumers’ express informed consent before charging recurring subscription fees.
According to the FTC’s complaint, the company marketed its services as free and interest-free, but required users to enroll in a paid subscription plan, often without their knowledge. Consumers allegedly encountered barriers to cancellation, including disabled links and unclear steps, which resulted in unauthorized recurring charges.
Specifically, the lawsuit outlines several alleged deceptive practices, including:
Misleading “no-fee” marketing. The company advertised cash advances as fee-free, but consumers were required to enroll in a paid subscription to access the service.
Delayed access to funds. Although the company promoted instant fund transfers, consumers allegedly had to pay an additional expedited delivery fee to receive funds quickly.
Recurring charges without consent. The company allegedly failed to obtain consumers’ express informed consent before initiating subscription charges.
Insufficient disclosure of trial terms. Consumers were automatically enrolled in a paid subscription following a free trial, without clear and conspicuous disclosures.
Obstructive cancellation process. Some users were allegedly unable to cancel within the app, and others encountered unnecessary and cumbersome hurdles when attempting to prevent further charges.
Retention of charges after cancellation. The FTC alleged that the company kept charging users even after they attempted to cancel their subscriptions.
Under the stipulated order, the company must pay $10 million in consumer redress and a $7 million civil penalty. The company is also expressly barred from misrepresenting product features, charging consumers without affirmative express consent, and using designs that impede cancellation.
Putting It Into Practice: While the CFPB and state regulators continue to recalibrate their supervisory priorities, the FTC has remained consistent in its focus on unfair or deceptive acts and practices. This enforcement underscores the FTC’s longstanding commitment to stamping out deceptive marketing practices (previously discussed here, here, and here). While the CFPB has taken a step back, the FTC has continued its aggressive enforcement posture. Companies should review this enforcement action with an eye towards their own marketing practices.
Wyoming’s New Non-Compete Law Starts in July: Employers Need to Look at Their Agreements Now
Takeaways
Effective 07.01.25, Wyoming law significantly restricts how and when employers can use covenants not to compete and renders most new non-compete agreements unenforceable.
The law allows exceptions for the sale or purchase of a business, trade secret protection, the recovery of training and relocation expenses, and executives and key professional staff.
The law voids non-compete provisions for physicians, giving them full rights to communicate their new practice location and information to patients with rare disorders without risk of litigation.
Article
On Mar. 19, 2025, Wyoming Governor Mark Gordon signed Senate Bill 107 into law, fundamentally reshaping the landscape for non-compete agreements in a major legislative move that will impact employers across Wyoming. Effective July 1, 2025, the new law significantly restricts how and when employers can use covenants not to compete and makes most traditional non-compete agreements executed on or after the effective date unenforceable.
What Has Changed?
Previously, Wyoming allowed employers considerable flexibility in drafting non-compete agreements. Under the new statute, non-compete agreements that restrict an employee’s ability to earn a living, either in skilled or unskilled labor, are generally void.
Important Exceptions
While the general rule is clear — non-competes are mostly unenforceable — there are important exceptions employers must understand:
1. Sale or Purchase of a Business: Non-competes remain valid when they accompany the sale or transfer of a business or its assets. This preserves protections for buyers and sellers in significant business transactions.
2. Trade Secrets Protection: Wyoming businesses can still protect legitimate trade secrets through narrowly tailored non-compete agreements. Importantly, these agreements must strictly adhere to statute. Wyo. Stat. § 6‑3‑501(a)(xi) defines “trade secret” as “the whole or a portion or phase of a formula, pattern, device, combination of devices or compilation of information which is for use, or is used in the operation of a business and which provides the business an advantage or an opportunity to obtain an advantage over those who do not know or use it.” Employers should carefully draft language reflecting this precise statutory definition.
3. Recovery of Training and Relocation Expenses: Employers can recover expenses incurred from training, education, or relocating employees, provided clear terms are outlined:
Up to 100% if employment lasted less than two years
Up to 66% if employment was between two and three years
Up to 33% if employment was between three and four years
4. Executives and Key Professional Staff: Non-compete agreements can remain valid for “[e]xecutive and management personnel and officers and employees who constitute professional staff to executive and management personnel.” This phrase is not defined in the statute. Employers should carefully consider which roles legitimately fit within this category and craft agreements accordingly.
Special Rules for Physicians
Wyoming’s legislature gave special attention to non-compete agreements involving physicians. Any provision that restricts a physician’s practice after their employment termination is now void. Although all other provisions of their agreements remain enforceable, the new law gives physicians full rights to communicate their new practice location and information to patients with rare disorders (as defined by the National Organization for Rare Disorders) without risk of litigation. This specific patient-focused exception reflects public policy prioritizing patient care continuity over contractual restrictions.
Applicability of the New Law
The statute applies only prospectively and only covers contracts executed on or after July 1, 2025. Existing non-compete agreements, and all those signed before July 1, 2025, will remain unaffected and enforceable according to their original terms.
Recommended Employer Action
Given this significant legislative shift, employers must carefully review and update employment agreements to comply with Wyoming’s new legal landscape. It is critical for businesses to:
Review and Revise: Carefully audit your existing employment agreement templates and policies to ensure compliance with the new law before July 2025.
Identify Exceptions: Evaluate which roles within your company may legitimately fall under permitted exceptions and update specific contract language accordingly.
Collaborate with Employment Counsel: Seek strategic advice from experienced employment counsel to mitigate risks, ensure full compliance, and protect your company’s interests.
OFAC Final Rule Extends Recordkeeping Requirements to 10 Years
Highlights
U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published a new final rule to extend recordkeeping requirements to 10 years, effective March 21, 2025
The new recordkeeping requirement is consistent with last year’s statute of limitations extension for most OFAC violations from five years to 10 years
OFAC affirmed that a conflict such as EU regulations mandating a shorter recordkeeping period would not excuse compliance
On April 24, 2024, former President Joe Biden signed into law the 21st Century Peace through Strength Act. Section 3111 of the Act extends the statute of limitations for civil and criminal violations of the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) from five years to 10 years. These two statutes govern most sanctions programs enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).
Pursuant to this executive order, OFAC issued a final rule on March 21, 2025, extending recordkeeping requirements for covered parties from five to 10 years. This final rule, which was effectively immediately, followed an interim final rule published by OFAC in September 2024 soliciting public comment.
The newly extended recordkeeping requirements apply to all companies and persons engaging in transactions and holding blocked property subject to OFAC oversight. Such persons are required to keep a full and accurate record of transactions and blocked property and to ensure that these records are available for examination for at least 10 years.
OFAC also made clear that a conflict in law would not excuse compliance with these requirements. The final rule specifically addresses a scenario in which the 10-year recordkeeping period may conflict with the European Union’s regulations on anti-money laundering and counterterrorism financing that mandate deletion of records after five years. In such a scenario, OFAC points to its prior guidance that said although it would consider a conflict of law on a case-by-case basis when determining the appropriate administrative action or penalty, full compliance with OFAC requirements is still expected.
Takeaways
This rule is the most recent example of the U.S. government’s increasing use of sanctions in recent years in support of its foreign policy and national security objectives. Companies may experience higher costs related to compliance with this rule, especially as standard business record retention periods are usually shorter. Additionally, companies should consider updating training, compliance programs, and due diligence checklists to reflect the extended recordkeeping period.
CFTC Accepting Whistleblower Award Claims for Financial Grooming Scam
On March 26, the CFTC posted a Notice of Covered Action for a $2.3 million enforcement action taken against a purported digital asset platform for an alleged online romance scam, signaling that the Commissions is accepting whistleblower award claims for the case.
Key Takeaways:
A court judgement found Debiex liable for misappropriating over $2 million in customers’ funds in an online romance fraud scheme
Online romance fraud schemes, including “pig butchering,” are a focus of the CFTC
Qualified CFTC whistleblowers are eligible to receive awards of 10-30% of the funds collected in connection with their disclosure
On March 26, the Commodity Futures Trading Commission (CFTC) posted a Notice of Covered Action (NCA) for a $2.3 million enforcement action taken against a purported digital asset platform for an alleged online romance scam. The NCA signals that the Commission is now accepting whistleblower award claims for the case.
Debiex Pig Butchering Case
The CFTC announced on March 21 that the U.S. District Court for the District of Arizona issued a default judgment against Debiex in response to the CFTC’s enforcement action. The judgement finds Debiex liable for misappropriating over $2 million in customers’ funds.
According to the CFTC, “Debiex’s unidentified officers and/or managers cultivated friendly or romantic relationships with potential customers by communicating falsehoods to gain trust, and then solicited them to open and fund trading accounts with Debiex.”
“Unbeknownst to the customers, and as alleged, the Debiex websites merely mimicked the features of a legitimate live trading platform and the ‘trading accounts’ depicted on the websites were a complete ruse,” the CFTC further claims. “No actual digital asset trading took place on the customers’ behalf.”
The type of online romance scam carried out by Debiex is known as “Sha Zhu Pan” or “Pig Butchering.”
“As the graphic name suggests, these schemes liken the practice of soliciting consumers to participate in a fraudulent investment opportunity to ‘fattening up’ an unsuspecting pig prior to slaughtering it,” CFTC Commissioner Kristin N. Johnson explained in a January statement announcing the charges against Debiex.
The court order bans Debiex from trading in any CFTC regulated markets or registering with the CFTC and requires Debiex to pay a $221,466 civil monetary penalty and over $2.2 million in restitution.
“This judgment demonstrates the CFTC’s ongoing commitment to protecting U.S. citizens from online scams,” said Director of Enforcement Brian Young.
Notice of Covered Action and CFTC Whistleblower Program
The Notice of Covered Action posted by the CFTC for this enforcement action signals that individuals have 90 days to file a whistleblower award claim for the case.
Under the CFTC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information which leads to a successful enforcement action, are eligible to receive monetary awards of 10-30% of the funds collected in the action.
In 2023, the CFTC Whistleblower Office published a whistleblower alert on the ability to anonymously blow the whistle on romance investment frauds and qualify for awards and protections.
“Under the Whistleblower Program of the Commodity Futures Trading Commission (CFTC), individuals may become eligible for both financial awards and certain protections by assisting the CFTC with identifying perpetrators and facilitators of romance investment frauds under the CFTC’s jurisdiction, such as solicitations related to digital assets, precious metals, and/or over-the-counter foreign currency exchange (forex) trading,” the alert reads.
Since issuing its first award in 2014, the CFTC Whistleblower Program has awarded nearly $390 million to qualified whistleblowers. In the 2023 Fiscal Year, the CFTC received a record 1,744 whistleblower tips and issued 12 award orders, the most it has granted in a single year.
New U.S. Import Tariffs on Certain Automobiles and Parts
On March 26, 2025, President Trump signed an executive order directing new 25% tariffs on certain automobiles and automobile parts imported into the U.S. from all countries on or after April 3, 2025. This executive order comes as businesses await the outcome of the broader reciprocal trade plan also expected to be released on April 2.
The executive order builds on an investigation undertaken during President Trump’s first term focused on U.S. imports of passenger vehicles (sedans, sport utility vehicles, crossover utility vehicles, minivans and cargo vans), light trucks (collectively, automobiles) and certain automobile parts (engines and engine parts, transmissions and powertrain parts and electrical components — collectively, automobile parts) and their effect on the national security of the U.S. under Section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. 1862) (Section 232). When the U.S. Department of Commerce (DOC) issued findings and recommendations to the President in February 2019, the President did not take any tariff action in response to the DOC’s determination that those imports threatened to impair the national security of the United States. Now, however, President Trump has determined that changes in import trends since the initial investigation and 2019 report have exacerbated risks to U.S. manufacturing, noting that “[t]oday, only about half of the vehicles sold in the United States are manufactured domestically[.]”
These new 25% tariffs, building on the prior investigation, will largely be effective for certain automobiles (to be identified in a subsequent notice in the Federal Register) on or after 12:01 a.m. Eastern Daylight Time on April 3, 2025. The effective date for parts could be deferred; the executive order specifies an effective date to be published in the Federal Register “but no later than May 3, 2025.
Automobiles and parts eligible for the U.S.-Mexico-Canada free trade agreement (USMCA) preferential treatment will be treated differently than all other imports. Where automobiles qualify for preferential tariff treatment under USMCA, importers of those automobiles may be permitted to submit documentation identifying or substantiating the amount of U.S. content in each model imported into the United States and pay duties only on the remainder. Where automobile parts qualify for preferential treatment under USMCA, those parts will be exempted from duties until such time that the DOC, in consultation with Customs, establishes a process to apply the tariff exclusively to the value of the non-U.S. content of such automobile parts and publishes notice in the Federal Register. “U.S. content” refers to the value of the automobile attributable to parts wholly obtained, produced entirely or substantially transformed in the United States.
The duties imposed by this order will be supplemental to duties on imports already imposed pursuant to other legal tools, including IEEPA (e.g. Canada, China and Mexico), Section 232 of the Trade Expansion of 1962 (e.g. steel and aluminum), Section 301 of the Trade Act of 1974 (e.g. China) and any other authority.
These duties will be imposed concurrent with other action taken under the President’s Reciprocal Trade Plan, which is expected to announce new tariffs on April 2, 2025, and with any new tariffs imposed under the President’s March 25, 2025 executive order granting the State Department discretion to impose 25% import duties on U.S. imports from countries that themselves import Venezuelan oil on or after April 2, 2025.
FERC’s Co-Location Conundrum: Balancing Grid Reliability with Data Center Development as PJM’s Tariff Faces Scrutiny
Key Points
FERC’s Order Signals Transformative Change While Navigating Jurisdictional Limits: While FERC recognizes the urgent need to address co-location arrangements (particularly given the AI/data center boom), the intricate interplay of federal and state authority means any solution must carefully navigate jurisdictional boundaries. The Order reflects FERC’s attempt to maximize its impact within the framework of the Federal Power Act’s cooperative federalism.
Cost Allocation and Reliability Concerns Drive Reform: FERC’s primary concerns center on preventing cost-shifting to other ratepayers and ensuring grid reliability. The current Tariff’s lack of clear provisions for ancillary services, different co-location configurations, and sudden load shifts poses risks that FERC seeks to address through this proceeding.
Industry Response Suggests High Stakes for Multiple Stakeholders: The approximately 100 intervention motions filed indicate that stakeholders view this proceeding as potentially industry-reshaping. The outcome will likely influence how data center developers approach power supply strategies and could affect the viability of co-location as a solution to grid connection challenges.
Last year, the Federal Energy Regulatory Commission (“FERC”) convened a technical conference to discuss issues related to large loads being co-located with generating facilities (Docket No. AD24-11-000), which we summarized in the following client alert. In a related development late last year, Constellation Energy Generation, LLC (“Constellation”) filed a complaint against PJM Interconnection, LLC (“PJM”) pursuant to Section 206 of the Federal Power Act (“FPA”), arguing that PJM’s Open Access Transmission Tariff is “unjust, unreasonable and unduly discriminatory” due to the absence of guidance on co-located configurations where the generating asset is completely isolated from the grid (Docket No. EL25-20-000).
The importance of this topic is underscored by nearly daily announcements of new data center projects, such as the $500 billion proposed investment on AI infrastructure by OpenAI, SoftBank and Oracle highlighted by President Trump on the day after his inauguration. The massive power demands from both training and inference applications of AI are anticipated to place significant strains on power grids, while grid operators are contending with lengthy interconnection queues and insufficient buildout of transmission networks. In order to secure power supply for their projects, many data center developers are exploring co-location opportunities with new and existing generating facilities.
On February 20, 2025, FERC issued an order (the “Order”) consolidating the two dockets mentioned above and instituting for cause proceedings under Section 206 of the FPA, finding that PJM’s tariff appears to be unjust, unreasonable, unduly discriminatory or preferential (Docket No. EL25-49-00). FERC ordered PJM and the relevant transmission owners to either:
“show cause as to why the Open Access Transmission Tariff, the Amended and Restated Operating Agreement of PJM, and Reliability Assurance Agreement Among Load Serving Entities in the PJM Region (the “Tariff”) remains just and reasonable and not unduly discriminatory or preferential without provisions addressing with sufficient clarity or consistency the rates, terms and conditions of service that apply to co-location arrangements; or
explain what changes to the Tariff would remedy the identified concerns if [FERC] were to determine that the Tariff has in fact become unjust and unreasonable or unduly discriminatory or preferential and, therefore, proceeds to establish a replacement Tariff.”
On March 24, 2025, PJM and the transmission owners filed their responses to the Order, with both PJM and a joint answer submitted on behalf of a significant majority of the transmission owners arguing that the Tariff remains just and reasonable. The transmission owners urged FERC to clarify that co-located load served by generation interconnected to the transmission or distribution system is network load for the purposes of the Tariff. PJM presented a number of different configurations under the existing Tariff, while noting jurisdictional concerns based on federal/state shared jurisdiction and differences in regulation among the states.
Interested parties are able to respond with comments by April 23, 2025. Approximately 100 such entities have filed motions to intervene, which is indicative of the significance industry players are placing on these proceedings and FERC’s ultimate resolution.
FERC’s Analysis
Although the Order relates specifically to the complaint initiated by Constellation under Section 206 of the FPA, FERC is clearly conscious of many policy considerations that need to be addressed in the context of co-located large load configurations.
Jurisdiction. Although FERC has indicated that it is aware of the nationwide importance of co-located large load configurations, particularly with respect to the national security interests identified in facilitating the rapid buildout of AI infrastructure, it is also plainly conscious of its jurisdictional limitations. The Order highlights that the FPA only allocates jurisdiction to FERC for transmission and wholesale sales of electricity in interstate commerce, whereas retail sales, intrastate transmission and wholesaling, as well as siting authority, are all subject to state jurisdiction. Accordingly, there are jurisdictional limits to how transformative FERC’s guidance can be on this issue. The Order invites comments on when and under what circumstances co-located load should be considered as interconnected to the transmission system in interstate commerce. Specifically, FERC poses the query of whether fully isolated load should be understood as being connected to the transmission system, and if so, what characteristics would result in such a determination.1
Tariff Provisions. The Order makes a determination that the Tariff is “unjust and unreasonable or unduly discriminatory or preferential” due to its lack of clarity and consistency regarding rates and terms of use. For example, FERC comments that the Tariff does not account for costs associated with ancillary services that the co-located generator would be unable to provide, such as black start capabilities and load following services. There is also significant discussion about how the Tariff does not account for different co-location configurations, and specifically, how those differences may impact overall costs. Due to the ambiguities in the Tariff, FERC seems to be acutely concerned with the potential for parties to a co-location arrangement to shift costs to other ratepayers.
Reliability and Resource Adequacy. The concerns raised in the Order with respect to reliability and resource adequacy were identified and thoroughly discussed at the technical conference. For example, in the event a generator co-located with a large load customer temporarily goes offline, the large load customer could suddenly be drawing from the grid, thus potentially impacting overall network performance. Grid operators would be better placed if they had the ability to model such scenarios. Further, concerns relating to the removal of existing generating assets from capacity markets, and thus increasing rates of other consumers (at least in the short-term), were raised by many participants to the technical conference and restated in the Order. On the other hand, FERC notes that many of the concerns raised by serving large load customers would be present even if the customer is treated as network load rather than in a behind-the-meter configuration.
Questions. The Order stipulates that PJM and the transmission owners must include responses to a number of questions relating to: 1) transmission service, 2) ancillary or other wholesale services, 3) interconnection procedures and cost allocation, 4) the PJM capacity market, reliability and resource adequacy, and 5) general and miscellaneous questions which do not fall under any of these headings. The responses to these questions will assist FERC in framing its analysis of how revisions can be made to the Tariff to ensure it is just, reasonable and not unduly discriminatory.
Final Thoughts
Electricity infrastructure is already being built out at a rapid pace in the United States. This trend is set to continue, particularly to meet the needs of increased electrification across numerous sectors such as industry and transportation, along with the anticipated expansion of the data center fleet. Developers have pursued co-located arrangements as a potential means of reducing time frames for getting projects online. FERC’s guidance will result in greater certainty for developers on the costs and timing associated with co-location, which should clarify the role of co-location in the ongoing data center build-out.
1 Key questions about jurisdiction, cost allocation, and reliability turn on what it means for load to be isolated from the grid. For example, in the Complaint, Constellation describes “Fully Isolated Co-Located Loads” as behind the meter load with system protection facilities designed to ensure power does not flow from the grid to the load, with the PJM transmission owners refer to “fully isolated” load where both load and generator serving the co-located load are islanded from the transmission and distribution systems. PJM saw the nuance of different co-location agreements as risking to introduce regulatory gaps in federal and state jurisdiction.