OFAC Announces Sanctions Violation but No Fine Against US Bank

The Treasury’s Office of Foreign Assets Control issued a “finding of violation” against U.S.-based State Street Bank and Trust Co. (SSBT) after it violated U.S.-imposed sanctions on Iran, OFAC said in a May 28 notice. The bank was not fined, OFAC said, partly because the bank’s managers were likely unaware of the violations and because the bank cooperated with OFAC and improved its compliance program.

Between 2012 and 2015, SSBT served as a trustee for a customer’s retirement plan, OFAC said, processing at least 45 pension payments valued at more than $11,000 for a U.S. citizen living in Iran. The part of the bank overseeing the payments, the Retiree Services Staff (RSS), “were part of the SSBT business unit that had the business relationship with the retirement plan” but used their own sanctions screening filter instead of SSBT’s main screening system, OFAC said. RSS’s procedures “dictated” that they refer all potential sanctions list matches to “compliance personnel aligned with the line of business … rather than SSBT’s central Sanctions Compliance unit staff who have specialized sanctions expertise,” OFAC said. As a result, even though the bank’s sanctions screening software “produced an alert on each of the 45 payments due to the Iranian address … it was the business-aligned compliance personnel who were responsible for manually reviewing potential matches and approving the processing of the payments,” the notice said.

SSBT discovered and voluntarily reported the “deficiency” in its compliance program to OFAC in 2015, the notice said, and changed its procedures to “ensure that all RSS payments are now screened by its central screening platform.” OFAC did not fine the bank for several other factors, including the fact that no managers or supervisors “appear to have been aware of the conduct,” the bank’s “screening filter did appropriately identify and alert staff,” the “payments at issue may not have actually been transferred to Iran, though they were made on behalf of a person in Iran” and because “there is a possibility that the funds transfers could have become licensed.”

OFAC said factors that led to the finding of a violation include the fact that the bank’s RSS unit processed transactions for a person in Iran “after being alerted to the Iran connection,” “had actual knowledge that it was processing” those transactions and “caused harm to the sanctions program objectives and the integrity” to the Iranian Transactions and Sanctions Regulations. OFAC said other contributing factors included the fact that the bank “is a large and commercially sophisticated financial institution” and “had compliance screening issues that continued for a year after the Federal Reserve Bank of Boston notified the bank of a related issue pertaining to inadequate escalation procedures.”