OFAC recently announced its largest sanctions policy ever…$536 million. Credit Suisse AG, a Switzerland-based bank agreed to the momentous fine after processing 5,000 electronic funds transfers (EFTs) on behalf of banks and individuals in Cuba, Iran, Sudan, and Burma among other countries.
The settlement agreement describes an intricate scheme of processing code names, modifications to internal controls, and procedures designed to avoid any detection of involvement with Iranian banks in transactions processed through US banks. The 5,000 EFTs that were uncovered were all processed through Credit Suisse’s US subsidiary after the bank had altered information that would have otherwise been detected because of prohibited parties. The settlement also specified that several Credit Suisse executive and employees, including an individual responsible for compliance, were aware of the activities and the fact that US laws were being violated.
Credit Suisse voluntarily disclosed its own internal investigation of the illegal EFTs to OFAC in 2006, however the company failed to notify OFAC of another internal investigation it was conducting in a US dollar clearing bank for payments which involved sanctioned countries and persons. Credit Suisse did finally disclose this investigation to OFAC in 2007 but, by that point, OFAC had already launched its own investigation into these matters, causing Credit Suisse not to receive voluntary disclosure credit for those violations. The bank was charged with the following violations:
• 10 violations of Furnishing information about business relationships with boycotted countries or blacklisted persons involving transactions with Syria (15 CFR 760.2(d))
• 5 violations of Refusal to do business (15 CFR 760.2 (a))
• 5 violations of Furnishing to report the request to engage in a restrictive trade practice or foreign boycott (15 CFR 760.5)
The lessons to learn from this case are that international entities that are subject to US jurisdiction need to be aware of the risks involved in dealing with prohibited parties and when voluntarily disclosing any violations-disclose all violations, even suspected ones (OFAC’s economic sanctions enforcement guidelines offer a 50% reduction in fines with voluntary disclosure “credits”).
Information: http://www.treas.gov/offices/enforcement/ofac/civpen/penalties/12162009.pdf
