On September 12, 2024, the U.S. Department of the Treasury’s Office of Foreign Assets Control sanctioned Ly Yong Phat (“Ly”), a Cambodian businessman, and Cambodia-based entities that he owns and controls, including his conglomerate L.Y.P. Group Co, LTD (“L.Y.P Group”). The designations were imposed in connection with serious human rights abuse that occurred in connection with the forced labor and mental and physical abuse of trafficked individuals who work in online scam centers. According to Brad Smith, the Acting Under Secretary of the Treasury for Terrorism and Financial Intelligence, the sanctions were imposed to hold human traffickers accountable for their actions and to disrupt their ability to engage in illicit schemes.
According to a September 2023 alert released by The Financial Crimes Enforcement Network (“FinCEN”), confidence scammers are usually tasked with developing online relationships with potential victims to convince them to invest in virtual currency or over-the-counter foreign exchange schemes in an effort to fraudulently obtain their funds. The frontline scammers are often victims of human trafficking. According to the annual Trafficking in Persons Report (“TIP Report”) published by the Department of State in 2024, trafficking crimes in Cambodia, in particular, are widespread and endemic. According to the TIP Report, trafficked individuals are forced to work up to 15 hours a day and can be resold to work on other scam operations or subjected to sex trafficking. OFAC also reported that certain trafficked victims reported that they were lured by false employment opportunities to the newly-designated O-Smach Resort, a company owned by L.Y.P. Group, and forced to work on online scam operations after their phones and passports were confiscated. According to OFAC, individuals who called for help were beaten, tortured with electric shocks or threatened to be sold to other online scam gangs.
These designations were imposed pursuant to Executive Order 13818, which builds upon and implements the Global Magnitsky Human Right Accountability Act that targets those who engage in serious human rights abuse and corruption around the world. As a result of these designations, all property and interests in property of the designees within the United States or within the possession or control of a U.S. person are blocked, and U.S. persons are generally prohibited from engaging in transactions involving the designated persons. In addition, entities owned 50 percent or more by one or more designated persons are also blocked, unless they are exempt or authorized by a general or specific license issued by OFAC.
In connection with the new designations, OFAC also issued General License 8 under the Global Magnitsky Sanctions Regulations, 31 CFR part 583. The general license authorizes transactions involving entities that are blocked solely due to a property interest of Ly Yong Phat or L.Y.P. Group only if the entity does not appear on OFAC’s List of Specially Designated Nationals and Blocked Persons. OFAC also issued Frequently Asked Question 1191 to further clarify the provisions in General License 8.
U.S. Department of Treasury Press Release | General License 8 | FAQ 1191