The Office of Foreign Assets Control (OFAC) has enforced a fine of approximately $860,000 to First Bank SA, of Romania, and it's U.S. parent company, JC Flowers & Company, in regard to apparent violations of Iranian and Syrian sanctions. First Bank SA processed 98 commercial transactions totaling almost $4 million through U.S. banks on behalf of parties located in Iran and Syria. After they were acquired by JC Flowers & Company in 2018, First Bank SA continued to process payments in Euros to individuals located in Iran. The violations of the sanctions programs related to three specific categories of payment:

• Processing U.S. dollar payments for individuals or entities located in Iran
• Processing U.S. dollar payments for individuals or entities located in Syria
• Processing Euro denominated payments to Iran as a foreign subsidiary of a U.S. company

In early 2019, the national regulator of First Bank SA, the National Bank of Romania, audited the bank's financial transactions, when it noticed a single transaction in U.S. dollars, to finance the trade of timber from Romania to Syria. Following on from that single discovery, the regulator investigated the banks transactional history, dating back to 2014. One of the key discoveries during a two-year period between 2016 and 2018, identified First Bank SA's processing of 36 outgoing payments totaling over $1 million through U.S. banks in which the underlying trade finance documentation showed that the importers were located in Syria. After First Bank SA was acquired by American owned JC Flowers & Company in 2018; the bank continued to process Euro denominated payments totaling over $1.5 million outside the U.S. financial system involving Iranian parties.

OFAC had the necessary detail in order to impose fines based on the transactions being conducted in U.S. dollars and through U.S. banks; even though First Bank SA had no physical presence in the United States. The statutory maximum monetary penalty applicable to this level of violation was just over $31 million. However, as a result of the bank voluntarily self-disclosing information, changing their compliance screening tools and terminating relationships with sanctioned entities; OFAC determined these factors warranted a less severe penalty of $1.7 million dollars, before the settled amount of $860,000 was reached.

In the months that followed this investigation, OFAC published a Compliance Commitment Framework, providing both U.S. and non-U.S. entities with a set of guidelines on recommended controls needed to remain compliant with various country based sanctions enforcement programs.

OFAC's involvement in a non-U.S. bank audit investigation highlights the importance of foreign financial institutions understanding the scope and reach of U.S. sanctions regulations on transactions processed in U.S. dollars or within the United States.

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Posted 20 September 2021 by Ravi Amin, Trade Compliance Subject Matter Expert, Maritime, Trade & Supply Chain, S&P Global Market Intelligence