It’s never good when the email from OFAC that lands in your inbox contains the name of the bank and the name of the fine…or when they include the settlement agreement with the notice on the website…
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a $16,562,700 settlement with Bank of America, N.A. (Bank of America) to settle potential liability for apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations, 31 C.F.R. part 598; the Narcotics Trafficking Sanctions Regulations, 31 C.F.R. part 536; and the Reporting, Procedures and Penalties Regulations, 31 C.F.R. part 501. The settlement resolves OFAC’s investigation into transactions that Bank of America processed and accounts Bank of America maintained on behalf of individuals with multiple or multi-part last names on the List of Specially Designated Nationals and Blocked Persons (SDN List). Between September 10, 2005 and March 31, 2009, Bank of America processed 208 transactions totaling approximately $91,192 on behalf of, and failed to properly block five accounts owned by, 10 individuals whom OFAC had previously added to its SDN List.
How do you get from $91 thousand dollars to a $16 million dollar fine? When you don’t voluntarily self-disclose, and the items are egregious…
In addition, OFAC has determined that the 79 transactionsBank of America processed on or after October 6, 2006, constitute an egregious case. The totalbase penalty amount for all of the apparent violations was $83,650,000.
Under the Kingpin Act, the statutory maximum, per transaction, is $1,075,000 (although it should be more – look for my earlier post about inflation indexing). So 79 x $1,075,000 gives you $84,925,000 – so perhaps some of those 79 were voluntarily self-disclosed, although not many.
So, how do we get from $84 million to $16 million? It reads like a novel:
In reaching its determination that the apparent violations that occurred on or after October 6,
2006, were egregious, OFAC considered the following:
- Bank of America demonstrated reckless
disregard for U.S. sanctions requirements by failing for more than two years to adequately
address a known deficiency in its OFAC screening tool that prevented the bank from identifying
potential matches to individuals with multiple or multi-part last names on the SDN List;- As early
as October 2006, at least one official in Bank of America’s office responsible for OFAC
compliance was aware of the deficiency, but the bank did not resolve the deficiency until February 2009;- The potential harm to the U.S. sanctions program objectives was significant,
given the number of transactions, the benefit conferred to the SDNTs, and the length of time over
which the apparent violations occurred;- Bank of America is a highly sophisticated U.S. financial
institution;- Bank of America failed to take adequate remedial action for more than two years
after first identifying the deficiency in one of the bank’s screening tools;- Bank of America
processed additional apparent violations after it reported taking remedial actions to OFAC in
2006 and 2008; and- Bank of America’s sanctions history during the five years preceding the
dates of the apparent violations includes a settlement involving the operation of an account on
behalf of an SDNT. OFAC has no information showing that any member of Bank of America’s
staff or management had actual knowledge of the filter deficiency prior to October 6, 2006.Mitigation was extended because
- Bank of America has not received a penalty notice or Finding
of Violation from OFAC in the five years preceding the earliest date of the apparent violations;- Some of the apparent violations might have been eligible for a specific license under OFAC’s
existing licensing policy at the time the transactions occurred;- Bank of America has taken
substantial remedial action by correcting the deficiency that led to the apparent violations,
voluntarily rescreening its customer database to identify additional accounts it was operating or
had operated for persons named on the SDN List and disclosing the results to OFAC, providing
additional training to its OFAC compliance personnel, upgrading the OFAC screening tool, and
investing in additional sanctions compliance personnel; and- Bank of America substantially
cooperated with OFAC’s investigation, including by conducting an internal investigation into the
conduct giving rise to the apparent violations and providing the relevant information to OFAC,
agreeing to toll the statute of limitations, and subsequently extending the tolling agreement.A
further reduction was extended for agreeing to enter into this settlement regarding the apparent
violations.
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