OFAC Fines Romanian Bank, US Parent for Syria, Iran Sanctions Violations
A Romanian bank and its U.S. parent company were fined about $860,000 by the Office of Foreign Assets Control for violating U.S. sanctions against Iran and Syria, OFAC said in an enforcement notice. Romania-based First Bank SA processed nearly 100 transactions worth about $3.5 million through U.S. banks on behalf of sanctioned parties, the notice said. The bank continued to process transactions for Iranian customers after it was acquired by U.S.-based JC Flowers in 2018.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
First Bank voluntarily disclosed the violations to OFAC after one of its transactions involving a timber shipment to Syria was flagged by the National Bank of Romania. After the first violation was flagged, the bank in 2019 began a “five-year lookback” that revealed various transactions involving sanctioned parties, the notice said. In one instance, First Bank processed 34 payments worth more than $900,000 between March 2016 and December 2018 for an end-user in Iran. OFAC said those transactions “constituted an indirect exportation of financial services to Iran,” which violated the Iranian Transactions and Sanctions Regulations.
The bank violated the ITSR again between October 2018 and March 2019 when it processed 28 Euro-denominated payments worth more than $1.5 million, all of which were outside the U.S. financial system but involved Iranian parties. The bank had been acquired by JC Flowers in June 2018, making First Bank “an entity majority-owned by a United States person and thus subject” to U.S. sanctions, making those transactions violations of the ITSR.
In another instance, First Bank processed 36 illegal payments, worth more than $1 million, through U.S. banks between July 2016 and December 2018. OFAC said the “underlying trade finance documentation” showed that the importers involved in the transactions were located in Syria, which violated the Syrian Sanctions Regulations.
OFAC said First Bank didn’t understand that U.S. sanctions applied to banks with no “physical presence” in the U.S. The agency added that the bank’s compliance training and procedures “did not address the risk that First Bank could be indirectly exporting financial services through the U.S. financial system to sanctioned parties.”
Although the maximum potential penalty for First Bank was more than $31 million, OFAC pointed to several mitigating factors that helped reduce the fine, including the bank’s voluntary disclosure, the fact that it had not been issued a penalty notice in the previous five years, and its cooperation with OFAC’s investigation. The bank also updated its sanctions screening tool, ended relationships with sanctioned customers, introduced improved due-diligence measures, more than doubled its compliance staff and agreed to conduct more sanctions training for employees.
OFAC said aggravating factors included the bank’s “reckless disregard” for U.S. sanctions because of its failure to implement “adequate” compliance controls. The bank also had “actual knowledge or reason to know” it was processing payments on behalf of parties in Iran and Syria, OFAC said, and conferred more than $3 million in “economic benefit” to people in both countries, “causing harm” to U.S. sanctions programs for at least three years.
First Bank’s violations highlight the importance of foreign banks understanding the scope of U.S. sanctions regulations for transactions processed through the U.S., OFAC said. It also underscored the importance of U.S companies conducting sanctions due-diligence before and after acquisitions and to monitor new subsidiaries. A JC Flowers spokesperson declined to comment.