$1.7 Million Penalty Against Bank for Processing Transactions for Sanctioned Entity
The Office of Foreign Assets Control reports that a financial institution headquartered in Switzerland has agreed to remit $1.7 million to settle its potential civil liability for apparent violations of the Global Terrorism Sanctions Regulations. OFAC states that this enforcement action highlights the importance of institutions, including foreign financial institutions that purchase, sell, transfer or otherwise transact in U.S. securities, taking appropriate measures to ensure compliance with all applicable sanctions when they have operations or otherwise conduct business in multiple jurisdictions that have implemented sanctions against particular individuals, entities or countries.
An OFAC press release states that over a five-year period the bank processed 222 transactions related to securities held in custody in the U.S. for or on behalf of an individual designated as a blocked person for committing or supporting terrorism. Although the bank maintained a global OFAC policy that required it to conduct screening of all outbound and inbound funds transfers, its processing of the these securities-related transactions never generated any alerts because it considered them to be internal transfers since they did not involve external parties.
The total base penalty amount for the apparent violations was $3,778,000. The following were considered aggravating factors: the bank acted with reckless disregard for U.S. sanctions requirements by failing to implement adequate controls to prevent the apparent violations from occurring despite numerous warning signs that its conduct could lead to violations of U.S. sanctions laws; multiple business lines and personnel within the bank, including supervisory and management staff within its compliance department, had actual knowledge of the conduct that led to the apparent violations; the bank processed 222 transactions for or on behalf of the blocked person and conferred economic benefit to that person in the amount of $2.5 million; and the bank is a large and commercially sophisticated international financial institution. The following were considered mitigating factors: the bank had not received a penalty notice or finding of violation from OFAC in the previous five years, has a global sanctions policy in place that requires it to comply with the sanctions programs administered by OFAC, took remedial action in response to the apparent violations (including a thorough internal investigation), and substantially cooperated with OFAC’s investigation.
OFAC notes that although the bank identified all of the apparent violations, these do not constitute voluntary self-disclosures because they were substantially similar to another apparent violation of which OFAC was already aware.