OFAC Announces Largest Enforcement Settlement in Five Years

Treasury’s Office of Foreign Assets Control announced two settlements totaling more than $650 million with a United Kingdom-based bank that allegedly violated U.S.-imposed sanctions on Cuba, Iran, Syria, Zimbabwe and now-repealed sanctions on Myanmar and Sudan, OFAC said in an April 9 notice. The announcement marked OFAC’s largest settlement amount since June 2014, when the agency reached a $963 million settlement with a bank that also violated sanctions on Cuba, Iran, Myanmar and Sudan.

OFAC said the settlement with the company, Standard Chartered Bank (SCB), is part of a “global settlement” with several federal, state, local and foreign governments, including the U.K.’s Financial Conduct Authority. The settlement was split in two parts: a roughly $639 million settlement for violations of sanctions imposed on Cuba, Iran, Myanmar, Syria and Sudan, and an $18 million settlement for violating sanctions on Zimbabwe.

In the first settlement, OFAC labeled SCB’s actions as an “egregious case,” saying the bank did not voluntarily disclose violations that involved completing nearly 9,500 transactions worth more than $430 million from June 2009 to June 2014. The transactions were processed “to or through the United States” and involved sanctioned people or countries, according to the notice. OFAC said the majority of the violations were related to accounts in Iran maintained by SCB’s Dubai branches. SCB Dubai processed transactions through the bank’s main New York office “or other U.S. financial institutions on behalf of customers that sent payment instructions to SCB Dubai while physically located” in Iran.

OFAC listed several aggravating factors that contributed to the settlement, including SCB’s “reckless disregard” and failure “to exercise a minimal degree of caution or care” regarding U.S. sanctions, its direct involvement in “discussions regarding specific customers or products and services that posed OFAC sanctions risks,” and the “significant harm to multiple economic sanctions programs” that the apparent violations caused. OFAC also called SCB’s compliance program “inadequate,” saying it “suffered from multiple system deficiencies” despite being a “large, sophisticated financial institution.”

OFAC also listed several mitigating factors, including SCB’s cooperation with OFAC during the agency’s investigation, the “remedial efforts” SCB has taken and the fact that a “small number” of the Syrian transactions took place only shortly after the 2011 executive order that banned trade with Syria.

In the second settlement, OFAC said SCB’s affiliate in Zimbabwe maintained accounts with people or entities on OFAC’s Specially Designated Nationals List. The nearly 1,800 transactions with parties on the SDN list were processed by SCB’s New York office and were worth more than $75 million, OFAC said.

OFAC labeled this case as “non-egregious” and said SCB voluntarily disclosed the violations. The agency listed several aggravating factors, including SCB knowingly conducting business with customers on the SDN list for “several years,” the “significant harm” to U.S. sanctions program objectives and its “inadequate” compliance program. OFAC listed one mitigating factor: SCB’s cooperation with the agency, including signing a statute of limitations tolling agreement.

These were not SCB’s first two settlements with OFAC. In 2012, OFAC reached a $132 million settlement with the bank after it found it violating several U.S.-imposed sanctions, including sanctions on Libya and Iran. OFAC said SCB has taken a “comprehensive global remediation” of its compliance program since 2013, including forming a “special board committee” that oversees SCB’s financial crime compliance, spending nearly $3 billion on compliance since 2012, and hiring new leadership and increasing legal staff for its compliance program “six-fold” since 2012. As part of the settlement agreement, OFAC said SCB will “sustain its commitment” to compliance by ensuring its leadership creates a “culture of compliance,” performing regular risk assessments and audits, and providing continued compliance training.

The two settlements are the latest signs of a trend that trade lawyers say is only expected to continue: an increase in the number and aggressiveness of OFAC enforcement actions (see: 1902150053). The settlements marked the sixth and seventh OFAC has issued this year, the same number of settlements the agency issued in all of 2018. The combined value of OFAC's 2019 settlements -- about $665 million -- is the most since it announced about $1.2 billion worth of settlements in 2014.