Completing the Paperwork – Priceless! Finding of Violation against MasterCard

MasterCard was guilty of RPPR (Reporting Penalties and Procedures Regulations) violations. Basically, the firm had accounts of Iranian banks that it failed to report:

 

MasterCard had previously taken steps to restrict the above-referenced accounts following the issuance of Executive Order 12959 of May 6, 1995, “Prohibiting Certain Transactions With Respect to Iran” (“E.O. 12959”), which prohibited the exportation of goods, services (including financial services), or technology from the United States to Iran. In the time between the issuance of E.O. 12959 and the above-referenced designations, the Bank Melli and Bank Saderat accounts became dormant on MasterCard’s books, but the assets in the accounts nonetheless remained with MasterCard. MasterCard, however, failed to report the accounts to OFAC as blocked following OFAC’s designation of the banks. By failing to properly report the above– referenced accounts in which Bank Melli and Bank Saderat had an interest, MasterCard violated § 501.603(b) of the RPPR. 

And why a Finding of Violation?

 

A Finding of Violation is appropriate given that 

  • MasterCard is a large and commercially sophisticated financial services company; 
  • MasterCard’s failure to properly block and report these accounts to OFAC resulted in OFAC’s reports to Congress and responses to other inquiries related to blocked property being incomplete, which could have had a negative impact on U.S. government decision-making; 
  • MasterCard’s failure to properly record interest on the accounts reduced the value of blocked assets available to the Congress and the President; and 
  • MasterCard’s OFAC compliance program appears to have lacked internal controls that would have prevented, or later identified the oversight of, the violations. 

OFAC also considered that 

  • no MasterCard personnel, including managers or supervisors, appear to have had actual knowledge of the conduct that led to the violations; 
  • although MasterCard failed to report these funds to OFAC, the funds never reached the sanctioned parties; 
  • MasterCard has not received a penalty notice or Finding of Violation from OFAC relating to substantially similar violations in the five years preceding the date of the conduct giving rise to the violations; and 
  • MasterCard substantially cooperated with OFAC’s investigation, including by voluntarily self-disclosing the violations to OFAC and by executing a statute of limitations tolling agreement and an extension to the agreement. 

OFAC also considered that a Finding of Violation is the most appropriate response to promote compliance with OFAC reporting obligations by institutions such as MasterCard. 

As is painfully obvious from that last bit (highlighting added), the real purpose in issue Findings of Violations (which are the least frequently-issued enforcement actions) is to educate other firms to mind their Ps and Qs.

Links:

OFAC Notice

Finding of Violation

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