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$16.5 Million Penalty Against Bank for Processing Transactions for Blocked Individuals

Wednesday, July 30, 2014
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control reports that a U.S.-based financial institution has agreed to pay $16.5 million to settle potential civil liability for 213 apparent violations of U.S. sanctions. OFAC states that between Sept. 10, 2005, and March 31, 2009, this bank processed 208 transactions on behalf of, and failed to properly block five accounts owned by, ten individuals whom OFAC had previously added to its List of Specially Designated Nationals and Blocked Persons.

The total base penalty for these violations was $83.6 million. Although the bank identified most of the apparent violations, OFAC does not consider these to be voluntary self-disclosures because they were substantially similar to other apparent violations of which OFAC was already aware.

In addition, OFAC has determined that the 79 transactions processed on or after Oct. 6, 2006, constitute an egregious case. In reaching this determination OFAC considered the following: (1) the bank demonstrated reckless disregard for U.S. sanctions requirements by failing for more than two years to adequately address a known deficiency in its OFAC screening tool that prevented it from identifying potential matches to individuals with multiple or multi-part last names on the SDN List; (2) as early as October 2006 at least one official in the bank’s office responsible for OFAC compliance was aware of the deficiency but it was not resolved until February 2009; (3) the potential harm to U.S. sanctions program objectives was significant given the number of transactions, the benefit conferred to the SDNTs and the length of time over which the apparent violations occurred; (4) the bank is a highly sophisticated U.S. financial institution; (5) the bank processed additional apparent violations after it reported taking remedial actions in 2006 and 2008; and (6) the bank’s sanctions history during the five years preceding the dates of the apparent violations includes a settlement involving the operation of an account on behalf of an SDNT.

However, mitigation was extended because (1) the bank has not received a penalty notice or finding of violation from OFAC in the five years preceding the earliest date of the apparent violations; (2) some of the apparent violations might have been eligible for a specific license under OFAC’s existing licensing policy at the time the transactions occurred; (3) the bank has taken substantial remedial action by correcting the deficiency that led to the apparent violations, voluntarily rescreening its customer database to identify additional accounts it was operating or had operated for persons named on the SDN List and disclosing the results to OFAC, providing additional training to its OFAC compliance personnel, upgrading the OFAC screening tool, and investing in additional sanctions compliance personnel; and (4) the bank substantially cooperated with OFAC’s investigation, including by conducting an internal investigation into the conduct giving rise to the apparent violations and providing the relevant information to OFAC. A further reduction was extended for agreeing to enter into a settlement.

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