ENFORCEMENT INFORMATION FOR October 30, 2010
Sumitomo Mitsui Banking Corporation Settles Sudanese Sanctions Regulations Allegations: Sumitomo Mitsui Banking Corporation ("SMBC"), a Japanese corporation, has agreed to pay $229,380 to settle allegations that SMBC’s New York Branch Office ("SMBCNY") violated the Sudanese Sanctions Regulations, 31 C.F.R. part 538 (the "SSR").
The Office of Foreign Assets Control ("OFAC") alleged that, from on or about December 9, 2005, until on or about December 1, 2006, SMBCNY appears to have violated the SSR when it exported services to Sudan through its processing of the payments for SMBC’s purchase of six export bills, in an aggregate amount of $1,037,988, relating to letters of credit ("LC") issued by Sudanese banks and by its receipt of two USD payments, in the aggregate amount of $15,357,720, related to approximately forty LCs issued by a Sudanese bank.
OFAC determined that SMBC voluntarily self disclosed the matter to OFAC and that the alleged violations constituted a non-egregious case. The base penalty amount for the apparent violations is $655,373. See OFAC’s Economic Sanctions Enforcement Guidelines, 74 Fed. Reg. 57,593 (November 9, 2009) (also available at www.treas.gov/ofac). The settlement amount reflects OFAC’s consideration of the following General Factors: SMBCNY is part of a commercially sophisticated international bank and had reason to know its conduct may have violated the SSR; SMBC has no violations of this nature on record with OFAC; SMBC substantially cooperated with OFAC’s investigation of the alleged violations; and SMBC promptly responded to all requests for additional information and agreed to a statute of limitations tolling agreement when requested by OFAC.
1) Demonstrates that for destinations that are still service embargoed, such as Crimea or Syria, a bank's involvement in any aspect of a trade-related transaction may be considered an "export" of a financial service to that destination, even without general prohibitions as broad as that of the CACR or the ITSR (e.g. 560.206).
2) Irregular fact pattern in which a foreign non-U.S. branch routes a payment through New York, but where there is no evidence that the non-U.S. entity caused the U.S. entity to violate the law, e.g. by stripping or otherwise removing information that would have permitted the U.S. entity to discern whether the transaction was permissible. This apparently still constitutes a foreign person "causing" a primary sanctions violation from abroad.
3) It is not clear why this was considered an export of a service "to Sudan," rather than the facilitation of an underlying trade transaction. Presumably the transactions were effected on or behalf of a Sudanese person. In this case, it would appear that there was a degree of interaction between SMBC/NY and the Sudanese L/C issuers.