Settlement Agreement between the U.S. Department of the Treasury’s Office of Foreign Assets Control and Banco Popular de Puerto Rico
The United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a settlement with Banco Popular de Puerto Rico (BPPR), a Puerto Rican bank with branches in Puerto Rico and the Virgin Islands. BPPR agreed to remit $225,937.86 to settle its potential civil liability for 337 apparent violations of the Venezuela Sanctions Regulations. The apparent violations occurred when BPPR processed transactions totaling $853,126 on behalf of two individuals who were low level employees of the Government of Venezuela (GoV), in apparent violation of U.S. sanctions against Venezuela. All of the apparent violations resulted from the maintenance of four personal accounts operated by these two employees of the GoV. The settlement amount reflects OFAC’s determination that BPPR’s apparent violations were non-egregious and voluntarily self-disclosed.
So, the skinny is that Banco Popular didn’t catch on for 14 months that they had 2 Venezuelan government employees on their books:
Shortly after the issuance of E.O. 13884, BPPR began planning the methodology for the review of accounts that might be impacted by the executive order. However, it was not until October 26, 2020 — 14 months after E.O. 13884 was issued — that BPPR identified and blocked the four personal accounts of two customers. Documentation BPPR had at the time E.O. 13884 was issued showed that one of the customers worked in a clerical level position in the GoV’s Diplomatic Representation Office, and the other customer was a customer service representative of Compañía Anónima Nacional Teléfonos de Venezuela (CANTV), a Venezuelan state-owned entity. OFAC had issued General License 34A (GL 34A) on November 5, 2019, which authorized transactions involving certain GoV persons, but neither of these individuals met the criteria for GL 34A. BPPR’s delay in identifying these customers for 14 months following the issuance of E.O. 13884 resulted in 337 apparent violations of the VSR, 31 C.F.R. § 591.201, totaling $853,126 (the “Apparent Violations”).
Now, $850K in transactions over 14 months for 2 “low-level” government employees seems excessive – probably why OFAC didn’t settle for a Cautionary Letter or Finding of Violation. That’s over $60,000 per month for the pair. Even if you figure that every dollar that came into the account went back out, that still means that these folks each took in over $15,000 each month – net after taxes and deductions. I know I don’t deposit that kind of money in my bank account each month – and I’m Mr. Watchlist.
Anyhow, the base Civil Monetary Penalty was $426,563 because it was voluntarily self-reported, and it was considered non-egregious. And that got about a 40% haircut. Why? Let OFAC tell you…
OFAC determined the following to be aggravating factors:
1) BPPR had documentation indicating that two of its customers were low level employees of the GoV at the time E.O. 13884 was issued, yet failed to identify those customers for 14 months.
2) BPPR is a mid-sized bank with more than $61 billion in assets.
OFAC determined the following to be mitigating factors:
1) BPPR represents that it took remedial action in response to the Apparent Violations, including:
o BPPR enhanced its program to better ensure compliance with OFAC sanctions, creating more robust sanctions-related procedures and developed additional resources and guidance in connection to sanctions alert review and disposition, including guidance on the VSR, and adding staff to manage and handle OFAC sanctions matters.
o BPPR reviewed its OFAC policies and procedures for identifying, reviewing, and reporting transactions that violate OFAC’s regulations, and enhanced its sanctions screening trainings.
2) BPPR cooperated with OFAC’s investigation by self-disclosing the Apparent Violations and responding to additional requests for information by OFAC in a timely and organized manner.
3) BPPR has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the Apparent Violations.
And here’s the lesson OFAC wants us all to understand:
As noted in Frequently Asked Question (FAQ) 680 in the context of E.O. 13884, OFAC expects financial institutions to conduct due diligence on their own direct customers (including, for example, their ownership structure) to confirm that those customers are not persons whose property and interests in property are blocked. This case demonstrates the importance of financial institutions conducting timely due diligence, such as taking the steps outlined in FAQ 680, following the issuance of new sanctions prohibitions.
Still, wow… although I could imagine you’d be able to find out who worked for the Venezuelan government or its State Owned Enterprises (SOEs).