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OFAC didn’t want $$$ from Mashreqbank, but…

ACTING SUPERINTENDENT ADRIENNE A. HARRIS ANNOUNCES $100 MILLION PENALTY ON MASHREQBANK FOR VIOLATIONS OF SANCTIONS LAWS 

Acting Superintendent of Financial Services Adrienne A. Harris announced today that Mashreqbank, PSC (“Mashreqbank” or the “Bank”) has agreed to pay $100 million in penalties pursuant to a Consent Order entered into with the New York State Department of Financial Services (“DFS” or the “Department”). The Consent Order resolves the Department’s investigation in illegal and non-transparent payments related to the Sudan that Mashreqbank processed through financial institutions in New York State, including Mashreqbank’s own New York Branch, between 2005 and 2014. DFS found that such transactions were in violation of U.S. sanctions laws.   

“The sanctions regulations exist to protect the national security of the United States, and Mashreq’s actions to circumvent those regulations were illegal and dangerous and will not be tolerated in an institution that has enjoyed the benefits of doing business in New York,” said Acting Superintendent Harris. “The Department remains committed to taking action against financial institutions that behave in ways that are designed to subvert those regulations.” 

In 1997, the United States imposed sanctions against the Sudan due to its government’s “continued support for international terrorism; ongoing efforts to destabilize neighboring governments; and the prevalence of human rights violations, including slavery and the denial of religious freedom . . . .” (See E.O. 13067). These sanctions rules generally required financial institutions operating in the United States to refrain from conducting business with the Sudan, the Sudanese government and any Sudanese Specially Designated Nationals.  

The Department’s investigation found that Mashreqbank instructed its employees to avoid populating certain fields in the payment messages sent between banks so as to conceal the prohibited Sudanese element of these transactions, thus bypassing the sanction filters of other banks which might otherwise trigger an alert or freeze the transaction. This resulted in Mashreqbank processing prohibited payments totaling over $4 billion between 2005 and 2009.  

In 2009, a Swiss bank used by Mashreqbank to process these transactions rejected a Sudan-related U.S. dollar-denominated transaction. The next day, news broke that the Swiss bank was being investigated by the New York County District Attorney’s Office for violating economic sanctions rules. As a result, Mashreqbank closed all U.S. dollar accounts held by Sudanese banks with Mashreqbank. The Bank, however, did not disclose these prohibited transactions to the Department, as required by regulation, until 2015.  

Indeed, despite having ample notice of the prohibited nature of the Sudan-related transitions by 2009, the Department also found that, between 2010 and 2014, Mashreqbank’s New York Branch processed additional Sudan-related, prohibited payments, totaling approximately $2.5 million.

Under the settlement reached today, in addition to payment of a $100 million penalty, Mashreqbank will be required to report on the status and sustainability of the Bank’s U.S. Department of the Treasury Office of Foreign Assets Control (“OFAC”) compliance program. 

DFS acknowledges the Bank’s substantial cooperation with the investigation and its ongoing remedial efforts.  

The Department coordinated its investigation into Mashreqbank with OFAC and the Federal Reserve Board, each of which has reached their own settlements with the Bank.

Link:

NY DFS Press Release

Consent Order

Categories: Civil Monetary Penalties Enforcement Actions NY DFS updates OFAC Updates Sudan Sanctions

eric9to5

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