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Small Size, Remedial Measures Earn Company Big Cut in OFAC Penalty

Thursday, September 11, 2014
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control announced Sept. 9 that a company located in Greece but incorporated in Delaware has agreed to pay $200,000 to settle potential civil liability for apparent violations of U.S. sanctions against Iran, Sudan and Syria. In addition, the Commodities Futures Trading Commission has issued an order requiring this company to pay a $150,000 monetary penalty and disgorge $80,000 in commissions and fees.

OFAC states that this company is a CFTC-registered introducing broker and commodity trading advisor that operates an electronic trading platform that allows its customers to automatically place currency foreign exchange trades with broker-dealers through that platform. According to the CFTC, the company had a procedure allowing screening for potential accountholders from OFAC-targeted countries to be delegated to a third-party service provider or agent provided that the company (a) had a written agreement with them outlining their responsibilities and (b) would actively monitor the delegation to assure that the procedures were being conducted in an effective manner. However, the CFTC states, the company failed to ensure that it had written agreements with all such entities. Consequently, the company opened approximately 400 accounts for accountholders from OFAC-targeted countries, primarily Iran, Sudan and Syria, and exported services to them by placing FX trades via its platform. The company also originated eight funds transfers totaling $10,264.36 destined for two individuals located in Iran.

According to OFAC, the base penalty for the apparent violations was $844.1 million. The following were considered to be aggravating factors: the company acted recklessly in maintaining accounts for, and placing FX trades on behalf of, persons subject to U.S. sanctions without undertaking any measures to comply with OFAC regulations; the company, including its senior management, had reason to know of the conduct that led to the apparent violations; the company’s actions caused harm to U.S. sanctions program objectives; and the company did not have an OFAC compliance program in place at the time of the apparent violations. However, OFAC considered the following to be mitigating factors: the company is small and has limited business operations, has taken remedial action in response to the apparent violations, has not received a penalty notice or finding of violation in the last five years, and substantially cooperated with OFAC’s investigation.

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