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$1.45 Billion in Penalties for Bank that Concealed Transactions with Sanctioned Parties

Tuesday, March 17, 2015
Sandler, Travis & Rosenberg Trade Report

The Justice Department announced March 12 that a global financial institution headquartered in Germany and its New York branch have agreed a total of $1.45 billion in penalties for concealing hundreds of millions of dollars in transactions prohibited by U.S. sanctions laws on behalf of Iranian and Sudanese businesses.

According to a DOJ press release, the bank will forfeit $563 million, pay a $79 million fine and enter into a deferred prosecution agreement with the DOJ for violations of the International Emergency Economic Powers Act and the Bank Secrecy Act. The bank will also pay a $200 million civil penalty to the Board of Governors of the Federal Reserve System, a $610 million penalty to the New York State Department of Financial Services, and a $258.6 million fine to the Treasury Department’s Office of Foreign Assets Control.  

The bank was charged with willfully failing to have an effective anti-money laundering program, willfully failing to conduct due diligence on its foreign correspondent accounts and willfully failing to file suspicious activity reports “even though managers inside the bank raised red flags about its sanctions-violating practices.” DOJ and OFAC indicate that the bank’s conduct involved numerous schemes designed to conceal the true nature of the illicit transactions from U.S. regulators, including engaging in payment practices that removed, omitted, obscured or otherwise failed to include references to U.S.-sanctioned persons in payment messages sent to U.S. financial institutions and creating a process to route payments involving sanctioned counterparties to a payment queue requiring manual rather than automated processing. 

OFAC notes that it mitigated its penalty because the bank has not received a penalty notice or finding of violation from OFAC in the five years preceding the date of the earliest transaction giving rise to the apparent violations and cooperated with OFAC’s investigation by engaging in an extensive internal investigation, responding to requests for information and executing a statute of limitations tolling agreement with multiple extensions. The bank also took remedial action, including increasing the number of employees with sanctions-related expertise, expanding its online training to include a specific section on sanctions and terrorist financing and requiring all employees globally to complete this training every two years, completing on-site training of more than 1,000 employees in Europe and Asia to promote the enhanced due diligence procedure for the trade finance business, and initiating a plan to enhance measures of various aspects of its sanctions program, including risk analysis, policies and procedures, training and awareness, improved payment filter technology, and controls and management reporting based on lessons learned internally and from a third-party evaluation.

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