This may end up being the biggest week in the history of the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). Yesterday, for the third day in a row, OFAC announced a large settlement against a financial institution for violations of U.S. economic sanctions. Yesterday OFAC took aim against the Bank of Tokyo-Mitsubishi UFJ (“Bank of Tokyo”) settling violations with the bank for alleged violations of the Burmese, Iranian, Proliferators of Weapons of Mass Destruction, Sudanese, and Cuban sanctions programs.
According to OFAC, Bank of Tokyo engaged in tactics to conceal the involvement of sanctioned countries and parties in transactions that were processed through financial institutions in the United States. Specifically, Bank of Tokyo maintained written policies calling upon their employees to systematically and purposefully delete or omit information identifying sanctioned targets. As a result of this policy, Bank of Tokyo processed 97 transactions for a total value of $5,898,943 through its New York branch and other U.S. banks. The policy was discovered by senior management, and after an internal review, Bank of Tokyo filed a voluntary self-disclosure. Bank of Tokyo was settled the allegations of sanctions violations for $8,571,634.
It is clear from the settlement amount that OFAC determined Bank of Tokyo’s conduct to be egregious. The fact that even with Bank of Tokyo filing a voluntary self-disclosure the settlement amount was higher than the amount of the transactions involved is a key indicator of how egregious OFAC considered the violations. Voluntary self-disclosures allow for an automatic 50% reduction in the enforcement penalty or settlement and are often recommended to be filed in order to put the case in the best possible light to OFAC. In this case, however, OFAC aggravated the penalty based on the fact that Bank of Tokyo’s conduct concealed the involvement of U.S. sanctions targets and displayed reckless disregard for U.S. sanctions. This aggravating factor was supported by the fact that the general manager of the Operations Center knew or had reason to know that procedures had been implemented instructing employees to manipulate payment instructions. Moreover, OFAC found that the sanctions targets received a substantial economic benefit as a result of Bank of Tokyo’s conduct. There were some mitigating factors applied as well for cooperating with OFAC and upgrading their internal compliance program, however, this is one case where OFAC definitely found that the bad outweighed the good.
The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or firstname.lastname@example.org.