Three affiliated banks have agreed to pay more than $1.3 billion in total penalties for violating U.S. economic sanctions programs. According to the Office of Foreign Assets Control, each bank will also be required to implement and maintain compliance commitments designed to minimize the risk of the recurrence of the conduct at issue, including (1) a commitment from senior management to promote a culture of compliance throughout each organization, (2) a commitment that each bank implements internal controls that adequately address the results of its OFAC risk assessment and profile, and (3) a commitment to providing adequate training to support each bank’s OFAC compliance efforts.
According to the Department of Justice, over the course of nearly 10 years one of the banks knowingly and willfully moved at least $393 million through the U.S. financial system on behalf of sanctioned entities, primarily the Islamic Republic of Iran Shipping Lines, an entity the U.S. government specifically prohibited from accessing the U.S. financial system. DOJ states that the bank engaged in this conduct through a scheme formalized in its own polices that was designed to conceal from U.S. regulators and banks the involvement of sanctioned entities in certain transactions. Among other things, the bank used companies that it knew would appear unconnected to IRISL despite being controlled by it.
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OFAC states that the bank acted recklessly by failing to implement and successfully deploy appropriate controls, continuing to process payments for an IRISL-affiliated customer after an internal directive not to, and processing U.S. dollar transactions on behalf of two companies despite warning signs of IRISL’s interest in their accounts. OFAC also cited the bank’s issuance of procedures designed to obscure the involvement of OFAC-sanctioned parties or countries after being warned against “creative solutions” by its legal department and the fact that it ignored shipping documentation that contained references to onward shipment to Iran. On the other hand, OFAC stated that the bank conducted an extensive internal investigation, identified all of the subject transactions, and took remedial actions.
A second bank used non-transparent methods to process transactions worth at least $20 million through the U.S. on behalf of customers (a) located or doing business in Iran and other countries subject to U.S. economic sanctions or (b) otherwise subject to those sanctions.
According to OFAC, aggravating factors include ignoring warning signs that the bank’s conduct likely constituted an apparent violation of U.S. economic sanctions laws, actions demonstrating that the bank was aware of at least some of this conduct, and apparent efforts to mislead other parties involved. Mitigating factors include that the bank conducted an internal investigation, responded to multiple requests for information in a timely manner, and took remedial actions.
For more information on U.S. sanctions and ways to ensure your company is in compliance, please contact Kristine Pirnia at (202) 730-4964.