Treasury’s OFAC Adjusts Civil Monetary Penalties

Effective June 14, 2019, The Department of the Treasury's Office of Foreign Assets
Control (OFAC) is adjusting civil monetary penalties for inflation pursuant to the
Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.

According to the Office of Management and Budget, the adjustment multiplier for the year 2019 is 1.0255. In order to complete the 2019 annual adjustment, each current CMP (Civil Monetary Penalty) is multiplied by the 2019 adjustment multiplier.

OFAC currently is authorized to impose CMPs pursuant to five statutes: The Trading With the Enemy Act (50 U.S.C. 4301–4341, at 4315) (TWEA); the International Emergency Economic Powers Act (50 U.S.C. 1701–1706, at 1705) (IEEPA); the Antiterrorism and Effective Death Penalty Act of 1996 (Pub. L. 104–132, 110 Stat. 1212–1319, at 1250; 18 U.S.C. 2339B) (AEDPA); the Foreign Narcotics Kingpin Designation Act (Pub. L. 106–120, 113 Stat. 1626– 1636, at 1632; 21 U.S.C. 1901–1908, at 1906) (FNKDA); and the Clean Diamond Trade Act (Pub. L. 108–19, 117 Stat. 631–637, at 634; 19 U.S.C. 3901–3913, at 3907) (CDTA).

Here are the existing and new maximum CMP amounts:

TWEA: Previous Max. $86,976; New Max. $89,170

IEEPA: Previous Max. $295,141; New Max. $302,584

AEDPA: Previous Max. $77,909; New Max. $79,874

FNKDA: Previous Max. $1,466,485; New Max. $1,503,470

CDTA: Previous Max. $13,333; New Max. $13,669

Complete information regarding the adjustment of all CMPs can be found at this link to the Federal Register.

Suzanne DeCuir, Global Trade Expertise

U.S. Based Paper Company Settles with OFAC on Sanctions Violations

White Birch Investment, LLC, a paper company headquartered in Greenwich, CT, recently reached an agreement settling a case brought by the Office of Foreign Asset Control (OFAC). White Birch’s Canadian subsidiary was facing possible civil liability for three alleged violations of the Sudanese Sanctions Regulations, 31 C.F.R. part 538 (SSR). White Birch USA was accused of facilitating the sale and shipment of 543 metric tons of paper of Canadian origin valued at approximately $354,000. According to OFAC, White Birch USA and its Canadian subsidiary were “actively involved in discussing, arranging, and executing the export transactions to Sudan.” OFAC concluded that White Birch USA did not voluntarily self-disclose these apparent violations; however, it was determined that these violations constituted a non-egregious case. These transactions date back to between April and December of 2013.

This settlement underscores how critical it is that U.S. companies put processes in place to effectively wall off their U.S. operations and staff interactions to prevent violation of OFAC’s regulations. This is especially important for U.S. companies with overseas affiliates who may be transacting business involving sanctioned territories; such territories currently include Iran, North Korea, Cuba, Syrian and the Crimea area of Ukraine.

Suzanne DeCuir, Global Trade Expertise, October 23, 2017

BNP Paribas Sentencedwith $8.8 Billion Penalty for Conspiring to Violate IEEPA and TWEA

    On May 1, 2015, the world’s fourth largest bank, BNP Paribas S.A. (BNPP) was sentenced to a five-year probation, ordered to forfeit over $8.8 billion to the United States, and pay a $1.4 million fine for conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Trading With the Enemies Act (TWEA). BNPP is a global financial institution headquartered in Paris that knowingly processed billions of dollars in transactions through the United States financial system on behalf of foreign sanctioned entities subject to U.S. economic sanctions.  The sentencing, imposed by Judge Lorna G. Schofield of the Southern District of New York,  constitutes the first time a financial institution has ever been convicted and sentenced for violating U.S. economic sanctions. The combined forfeiture and penalty resulted in the largest financial penalty ever imposed in a criminal case.

    In its guilty plea on July 9, 2014, BNPP admitted to knowingly and willfully moving over $8.8 billion through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban sanctioned entities between 2004 and 2012. Between July 2006 and June 2007, BNPP processed $6.4 billion of the $8.8 billion through the United States on behalf of Sudanese sanctioned entities, which are subject to U.S. embargo because of the Sudanese government’s role in facilitating terrorism and committing human rights abuses. 

    BNPP admitted to processing $1.74 billion on behalf of Cuban entities, even after it was clear that completing such transactions was illegal. Similarly, BNPP assisted Iranian sanctioned entities in transactions totaling more that $650 million, even after completing an internal investigation into sanctions compliance and pledging to cooperate with the government. 

    All U.S. government departments involved stressed the importance of this case and indicated that such action will be subject to similar consequences. Assistant Attorney General Caldwell stated that the “sentence demonstrates that financial institutions will be punished severely but appropriately for violating sanctions laws and risking our national security interests.” Chief Weber added that “the ability of IRS-CI and our partners to expose blatant violations of U.S. embargos and sanctions has changed the way financial matters are handled worldwide. We will continue to use our financial expertise to uncover these types of violations, as well as methodical and deliberate actions to conceal prohibited transactions from U.S. regulators and law enforcement.”

    Additionally, BNPP pleaded guilty in New York Supreme Court to falsifying business records and conspiring to falsify business records. As a result, BNPP agreed to terminate thirteen executives, including the Chief Operating Officer, suspend U.S. dollar clearing operations through its New York Branch and other affiliates for one year for business lines on which the misconduct centered, and extend for two years a monitorship put in place in 2013.

Aaron Ambrite, Extern, Global Trade Expertise

Company Settles Alleged Cuban Sanctions Violations with a $6 Million Penalty

On April 14, 2014, U.S. Office of Foreign Assets Control (OFAC) announced that CWT B.V. (CWT), a Netherlands company, has agreed to pay $5,990,490 to settle allegations of violating the Cuban Assets Control Regulations (CACR). Specifically, OFAC alleges that from August 8, 2006 to November 28, 2012, CWT violated the CACR when it provided unauthorized travel services to and from Cuba to apx. 44,430 persons. 

In 2006, CWT, a travel services provider incorporated in the Netherlands, became majority-owned by U.S. persons and thus subject to U.S. jurisdiction pursuant to the Trading With the Enemy Act (TWEA) and the CACR. OFAC determined that CWT voluntarily self-disclosed the apparent violations to OFAC, that the vast majority of the apparent violations occurred “prior to agency notice,” and that a small portion of the apparent violations occurred “subsequent to agency notice,” as they occurred after CWT filed its self-disclosure with OFAC.  Pursuant to OFAC’s Cuba Penalty Schedule, the base penalty for the alleged violations was $11,093,500. 

Among other factors, the settlement amount reflected the fact that CWT failed to exercise a minimal degree of care in that it did not recognize for years that it was subject to U.S. jurisdiction with respect to OFAC's Cuban sanctions .

Bank Settles Allegations of Iranian Sanctions Violations for $152 Million

On January 23, 2014, The Office of Foreign Assets Control (OFAC) announced that Clearstream Banking, S.A. (Clearstream), of Luxembourg, has agreed to remit $151,902,000 to settle potential civil liability for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR).

OFAC's press release states:

"From at least December 2007 through June 2008, Clearstream maintained an account at a U.S. financial institution in New York through which the Central Bank of Iran (CBI) maintained a beneficial ownership interest in 26 securities, with a nominal value of $2.813 billion, held in custody at a central securities depository in the United States.  Due to the omnibus nature of Clearstream’s account in New York, the CBI’s beneficial ownership interest in the 26 securities was not transparent to the U.S. financial institution. Clearstream, as intermediary, served as the channel through which the CBI held an interest in these securities.  Clearstream exported custody and related services from the United States to the CBI in apparent violation of the ITSR.  

OFAC officials met with Clearstream in late 2007 and early 2008 to discuss Clearstream’s business with Iranian clients, including implementing its decision to terminate this business.  In February 2008, Clearstream, acting on instructions from the CBI, transferred the securities entitlements free-of-payment (FOP) from the CBI’s account with Clearstream to a European bank’s newly-opened custody account at Clearstream, an account which allowed the CBI to continue holding its interest in the securities through Clearstream.  As a result of the FOP transfers, the record ownership of the securities entitlements on Clearstream’s books changed, but the beneficial ownership did not, resulting in the CBI’s interest being buried one layer deeper in the custodial chain.  Following the FOP transfers, the ultimate place of custody for the securities remained the United States, and the CBI’s interest continued to be held through Clearstream’s omnibus account in New York.  Given the totality of facts and circumstances surrounding the transfers, Clearstream had reason to know that the CBI was retaining beneficial ownership of the securities.  Clearstream’s exportation of services from the United States to the CBI continued after the securities entitlements were moved to the European bank’s custody account."

OFAC has determined that Clearstream did not voluntarily self-disclose the apparent violations, and that the apparent violations were reckless and constitute an egregious case.  The base penalty amount for the apparent violations was $5.626 billion. 

Russian Bank Settles Allegations of Weapons of Mass Destruction Proliferators Sanctions Regulations

On January 27, 2014, Joint-Stock Commercial Bank “Bank of Moscow” (Bank of Moscow), of Moscow, Russian Federation, has agreed to remit $9,492,525 to settle potential civil liability for 69 alleged violations of Executive Order 13382 of June 28, 2005 (E.O. 13382), and the Weapons of Mass Destruction Proliferators Sanctions Regulations.  

On October 25, 2007, OFAC designated Bank Melli Iran ZAO, Moscow, Russia (BMI Russia) pursuant to E.O. 13382.  From January 2008 to July 2009, Bank of Moscow sent 69 funds transfers totaling over $41 million for or on behalf of BMI Russia that were processed to or through the United States.  None of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment messages sent by Bank of Moscow in connection with these funds transfers included specific references to “Melli,” “Iran,” or BMI Russia’s SWIFT Business Identifier Code, but instead identified the bank through abbreviations such as “BMICJSCMOSCOWRUSSIA” (a reference to Bank Melli Iran Closed Joint Stock Company Moscow Russia) or “BMI CJSC.”  U.S. financial institutions processed all 69 of the funds transfers straight through without manual intervention.  

Bank of Moscow did not voluntarily self-disclose the alleged violations and the alleged violations constitute a non-egregious case.  The total base penalty amount for the alleged violations was $14,063,000.