FRB and OFAC Fine Bank for Sanction Violations

The Federal Reserve Board ("FRB") and the Treasury Office of Foreign Assets Control ("OFAC") fined a banking entity for apparent sanctions violations. The regulators charged that the bank provided software to a European bank engaged in transactions with sanctioned jurisdictions.

In a Settlement Agreement, OFAC found that the banking entity provided a software system to a European bank which used the software to process 124 finance transactions totaling in $532,068,794 involving parties based in sanctioned jurisdictions. OFAC said that the bank knew or should have known that the software system would process "transactions involving sanctioned jurisdictions or persons in violation of OFAC regulations," and that the bank "failed to exercise a minimal degree of caution or care in failing to identify and prevent such transactions for seven years. . . despite potential sanctions concerns (including specifically with respect to possible facilitation issues) raised internally at senior-management levels on multiple occasions." OFAC said that the banking entity engaged in apparent violations of (i) Iranian Transactions and Sanctions Regulations, (ii) Syrian Sanctions Regulations and (iii) the now repealed Sudanese Sanctions Regulations by providing the software to the European bank.

The banking entity agreed to (i) pay a fine of $30,000,000, (ii) waive any claim against OFAC or legal objection to the Agreement at a later date and (iii) undertake compliance measures for at least five years to minimize the risk of a similar recurrence of sanctions violations. OFAC noted that the banking entity had self-disclosed to OFAC the apparent violations.

In a separate Order of Assessment of Civil Money Penalty, the FRB stated that the banking entity violated OFAC regulations as a result of its risk-management and oversight failures to identify the legal risks associated with providing the software to the European bank, which constituted an "unsafe or unsound" practice. The FRB imposed a civil money penalty of $67,762,500.