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Major Fines Show Importance of Avoiding Sanctioned Entities

 

In 2019, a bank was ordered to pay $1.1 billion for conspiring to violate the International Emergency Economic Powers Act (IEEPA) and other international money laundering controls. It included a criminal conspiracy involving some 9,500 transactions worth a quarter of a billion dollars to the benefit of sanctioned Iranian entities.

More than half of the transactions were the result of deficiencies in the bank’s compliance program, which allowed customers to request U.S. dollar transactions from within sanctioned countries.

Not just banks in the U.S. are facing the penalties for transacting with sanctioned entities. Less than two weeks later, U.S. officials fined one of Europe’s largest banks, more than $1.3 billion for processing nearly $400 million for sanctioned entities and countries, including Iran, Libya and Cuba.

Bank deliberately altered screening

The bank not only did business with sanctioned entities, they even altered their screening to strip sanctioned countries from transaction information in a conspiracy run by compliance staffers.

Prosecutors said the bank “engaged in this criminal conduct through a scheme, formalized in its own bank policies, designed to conceal from U.S. regulators the involvement of sanctioned entities in certain transactions.” In one instance, the bank actually used its sanctions screening software to find and release illegal transactions to blacklisted regimes.

According to the Manhattan District Attorney’s office, since 2009, eleven banks have forfeited more than $14 billion in settlements for U.S. sanctions violations and violations of New York State law.

Financial institutions should apply extra diligence when onboarding new clients and when processing transactions through financial systems to ensure that they are detecting and preventing sanctions violations.

As recommended by The Wolfsberg Group, financial institutions should consider the following when reviewing their sanctions risks:

  • Jurisdictions and proximity or relationship with sanctioned countries
  • Location and business of international and domestic customers
  • Volume of transactions and distribution channels
  • Products and services offered and whether they represent a heightened sanctions risk

When using sanction/watch lists, not only look at those offered by OFAC but also relevant domestic lists. Lists provided by third-party providers, such as World-Check, can help to ease the burden when reviewing PEPs, aliases, names in non-Latin characters and more.

This white paper by CaseWare RCM looks at how to monitor and screen individuals, entities and transactions as well as best practices to optimize the results in order to avoid some of the penalties and fines associated with sanction violations. Download it here.

 

About Anu Sood

Anu Sood (LinkedIn | Twitter) is the Director Marketing at CaseWare RCM and is responsible for the company’s global marketing strategy. She has over 20 years of experience in product development, product management, product marketing, corporate communications, demand generation, content marketing and strategic marketing in high-tech industries.