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$7.7 Million Penalty for Ineffective Sanctions Compliance Procedures

Friday, March 27, 2015
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control announced March 25 a $7.7 million settlement with a California company to settle potential civil liability for 486 apparent violations of the Weapons of Mass Destruction Proliferators Sanctions Regulations, the Iranian Transactions and Sanctions Regulations, the Cuban Assets Control Regulations, the Global Terrorism Sanctions Regulations and the Sudanese Sanctions Regulations.

The settlement agreement states that for several years, despite processing a high volume of transactions and maintaining an international presence, this company does not appear to have implemented effective compliance procedures and processes to identify, interdict and prevent transactions in apparent violation of the sanctions programs administered by OFAC. In particular, the company failed to employ adequate screening technology and procedures to identify the potential involvement of U.S. sanctions targets in transactions that it processed.  As a result, the company did not screen in-process transactions to reject or block prohibited transactions.

Separately, between October 2009 and April 2013 the company processed 136 transactions to or from an account registered to an individual on OFAC’s List of Specially Designated Nationals and Blocked Persons. The company’s automated interdiction filter did not initially identify the account holder as a potential match to the SDN List, and when it did the company’s risk operations agents dismissed alerts on six separate occasions after failing to obtain or review documentation corroborating the identity of the SDN. 

OFAC determined that the apparent violations of the WMDPSR constitute an egregious case but that the others do not. The final penalty amount, which was mitigated down from more than $17 million, reflects that the company voluntarily self-disclosed the apparent violations, has taken remedial action (e.g., hiring new management within its Compliance Division and undertaking various measures to strengthen its OFAC screening processes and measures) and substantially cooperated with OFAC’s investigation and that OFAC had not issued a penalty notice or finding of violation against this company in the five years preceding the earliest date of the transactions at issue.

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