ENFORCEMENT INFORMATION FOR September 5, 2013
Deutsche Bank Trust Company Americas Settles Potential Civil Liability for Apparent Violations of Executive Order 13382 of June 28, 2005: Deutsche Bank Trust Company Americas ("DBTCA") has agreed to remit $18,900 to settle potential civil liability for two apparent violations of Executive Order 13382 of June 28, 2005, "Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters" ("E.O. 13382"). The Office of Foreign Assets Control ("OFAC") has determined that DBTCA did not voluntarily self-disclose the apparent violations and that the apparent violations constituted a non-egregious case. OFAC concluded that the apparent violations described below were not the result of willful or reckless conduct. The total base penalty amount for the apparent violations was $35,000.
On October 24, 2008, DBTCA processed a $3,177 funds transfer originated by Hansabanka’s customer, Air Baltic Corporation, destined for the account of "I.A.C." at Commerzbank AG, Frankfurt, Germany. The originator to beneficiary information field of the payment instructions contained the reference "MELIGB2L," the Business Identifier Code ("BIC") for the London branch of Bank Melli. OFAC designated Bank Melli, including all its offices worldwide, on October 25, 2007, pursuant to E.O. 13382. DBTCA processed the payment straight through and without manual intervention. DBTCA later determined that the beneficiary "I.A.C." referred to the "Iran Airport Company."
On March 11, 2009, DBTCA rejected rather than blocked a $10,000 funds transfer originated by Intercontinental Bank Plc, Lagos, Nigeria, on behalf of Amsergs Nigeria Ltd., destined for the account of Chahar Mahal va Bakhtiary Yeast Co., Isfahan, Iran, at the Export Development Bank of Iran ("EDBI"). OFAC designated EDBI on October 22, 2008, pursuant to E.O 13382. DBTCA stated that its automated interdiction software stopped the transaction for review due to a number of potential matches, including to Iran and to EDBI. A total of seven DBTCA employees, including a senior member of the review team who was the final reviewer for escalated OFAC matters, reviewed this transaction and failed to notice the reference to EDBI in the payment. Based on their review, DBTCA rejected the transaction based on the beneficiary’s location in Iran, rather than blocking the transaction due to the involvement of EDBI.
The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. OFAC considered the following to be mitigating factors: DBTCA has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the transactions giving rise to the apparent violations; and DBTCA took appropriate remedial action in response to these apparent violations. Although the apparent violations did not confer an economic benefit on a sanctioned entity, OFAC considered the fact that DBTCA’s actions of improperly rejecting rather than blocking the March 11, 2009, transaction negatively impacted the policy objectives of E.O. 13382. OFAC found the following to be aggravating factors in this case: six low-level DBTCA employees and a senior member of the review team who was the final reviewer for escalated OFAC matters were aware of the March 11, 2009, transaction; DBTCA is a large and commercially sophisticated financial institution; the bank failed to include the BIC of the London Branch of Bank Melli in its interdiction software; and a settlement in this case would demonstrate the necessity of including the BICs of financial institutions on the Specially Designated Nationals and Blocked Persons List in interdiction software.
Mitigation was further extended because DBTCA agreed to settle these apparent violations.
For more information regarding OFAC regulations, please visit: http://www.treasury.gov/ofac.
1) Rare case of a U.S. branch of a non-U.S. bank acting in an intermediary capacity being fined for automatic processing of a transaction originated by an unrelated entity (at the time a U-turn transaction that would have been permissible absent SDN involvement).
Compare current OFAC FAQ 116, originally issued in 2009, which states that OFAC "would not pursue an enforcement action against [a] bank for having processed" a transaction where a sanctioned party has an interest in the funds and where the bank acts only as an intermediary, does not have any relationship with blocked party, and neither knows nor has reason to know of the blocked party’s involvement.
This "soft safe harbor" pertaining to intermediary banks seems to relate primarily, if not exclusively, the need to perform active diligence on the customers of correspondent banks. Failure to install adequately functioning screening software capable of detecting potentially impermissible transactions in line with OFAC's expectations would seem to qualify as a "reason to know" of a blocked party's involvement.
2) At the time of the violation concerning EDBI, it was not yet the case that all property of the Government of Iran was blocked, so if the entity hadn't been an SDN, rejecting the transaction would have been appropriate.