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End of Year Clearance: OFAC Enforcement nets $653,347 from National Commercial Bank

NCB, based in Jeddah, Saudi Arabia, paid the settlement for 13 apparent violations of the Sudan and Syria-related sanctions in which the transactions went through the U.S. financial system between November 2011 and late August 2014. The non-egregious violations were voluntarily self-disclosed for 8 Syria-related violations, but not self-disclosed for the 5 Sudanese ones. When you consider them all, the base penalty was $1,814,854.

What happened

Between November 7, 2011 and August 28, 2014, NCB processed, directly or indirectly, 13 U.S. dollar (USD) transactions totaling $5,918,560 to or through the United States in circumstances where a benefit of NCB’s service was received by Sudanese or Syrian counterparties, or that involved goods originating in or transiting through Sudan or Syria. None of the Sudanese or Syrian parties was a customer of NCB. These transactions were in apparent violation of the Sudanese Sanctions Regulations (“SSR”), 31 C.F.R. § 538.205,1 and section 2(b) of Executive Order (E.O.) 13582 of August 17, 2011,2 respectively. The Apparent Violations began in late 2011, after the bank had started to implement more robust compliance measures intended to modernize and upgrade its compliance controls, including those relating to sanctions screening and OFAC sanctions compliance.

The calculation: the General Factors

The aggravating factors:

(1) NCB conferred substantial economic benefit to U.S.-sanctioned parties and caused significant
harm to the integrity of U.S. sanctions programs and their associated policy objectives by allowing sanctioned parties to conduct business in or through the United States for a number of years; and
(2) NCB is a large and commercially sophisticated financial institution.

and the mitigating ones:

(1) NCB did not act with willful intent to violate U.S. sanctions law or with a reckless disregard for its U.S. sanctions obligations;
(2) NCB has no prior sanctions history, including having not received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the earliest transaction giving rise to the apparent violations;
(3) NCB cooperated with OFAC’s investigation into the Apparent Violations, including by conducting an extensive transaction review and entering into a statute of limitations tolling agreement with multiple extensions;
(4) Most of the Syria-related Apparent Violations occurred shortly after the imposition of relevant prohibitions; and
(5) NCB enhanced compliance controls in response to past weaknesses and the subsequent Apparent Violations, including the following:
• Replaced its Board of Directors and senior executives and enhanced its compliance program by implementing new sanctions screening software and new training procedures for bank personnel;
• Implemented internal policies that require payment and non-payment messages to be transparent, in line with Basel requirements and FATF recommendations, and that prohibit the omission, deletion or alteration of information in the payment messages or orders;
• Required screening of all payments against international sanctions lists, including OFAC lists;
• Implemented an Anti-Money Laundering Department that is tasked with sanctions compliance and countering illicit finance, including money laundering and terrorist financing;
• Required prospective customer account openings to be subjected to substantial due diligence, including Compliance Department approval of any account opening, and restricted account openings to only residents of Saudi Arabia; and
• Prohibited the opening of USD accounts for any Sudanese customers or financial institutions.

The lesson to learn…

This enforcement action highlights the importance of ensuring that sanctions compliance policies and procedures address both direct and indirect sanctions compliance risks, and in particular, highlights the importance of implementing strong remedial measures in response to sanctions program lapses.

Admittedly skimpy…


OFAC Enforcement Information

Categories: Civil Monetary Penalties Enforcement Actions OFAC Updates Sudan Sanctions Syrian Sanctions


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