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$2.5 Million Penalty for Violations of Zimbabwe Sanctions

Wednesday, February 10, 2016
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control reports that a financial institution headquartered in the United Kingdom has agreed to remit $2,485,890 to settle its potential civil liability for 159 apparent violations of the Zimbabwe Sanctions Regulations. According to OFAC, the bank processed transactions to or through financial institutions in the U.S. for or on behalf of corporate customers of its Zimbabwe subsidiary that were owned 50 percent or more, directly or indirectly, by a person identified on the List of Specially Designated Nationals and Blocked Persons. OFAC states that this action highlights the importance for institutions with operations in countries with a significant presence of individuals and entities on the SDN List to take appropriate measures to ensure compliance with U.S. economic sanctions when processing transactions for or on behalf of their customers to, through or within the U.S.

OFAC has determined that the bank did not voluntarily self-disclose the apparent violations but that they constitute a non-egregious case. The total base penalty amount was $5,029,000 and the settlement amount reflects OFAC’s consideration of the following.

Aggravating factors

- Although the bank attempted to comply with OFAC sanctions despite various constraints imposed by Zimbabwean authorities, it failed to implement adequate controls to prevent the apparent violations from occurring despite numerous warning signs that its conduct could lead to a violation of U.S. sanctions laws.

- Multiple business lines and personnel within the bank, including supervisory and management staff in its compliance and audit functions, had actual knowledge or reason to know of the conduct that led to the apparent violations, including the limitations of the systems used with respect to capturing full information concerning the beneficial ownership of certain corporate customers.

- The bank processed 159 funds transfers totaling approximately $3,375,617 that conferred economic benefit to, and provided indirect access to the U.S. financial system for, blocked persons.

- The bank is a large and commercially sophisticated international financial institution.

- The bank’s compliance program was inadequate to identify customers as blocked persons and/or prevent the apparent violations from occurring.

Mitigating factors

- The bank has not received a penalty notice or finding of violation in the five years preceding the earliest date of the transactions giving rise to the apparent violations.

- The bank took remedial action.

- The bank substantially cooperated with OFAC’s investigation by submitting detailed and organized information and by executing a statute of limitations tolling agreement and an extension.

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