OFAC Starts September with Two Settlements
September 18, 2014

September is shaping up to be a busy month for the Office of Foreign Assets Control (OFAC).

First, there was a civil settlement with Citigroup Inc. The bank agreed to pay the agency $217,841 to avoid potential liability for violating several types of sanctions.

Half of the apparent violations – those running afoul of the Iranian Transactions and Sanctions Regulations (ITSR) – involved the bank’s largest trade processing center processing export bill collection applications totaling over $600,000 for goods shipped to Iran. Some of the goods were transported on Islamic Republic of Iran Shipping Lines, whose property and interests in property OFAC blocked pursuant to an executive order in 2008. Citibank disclosed these apparent violations to OFAC.

It did not, however, disclose four funds transfers it processed for Specially Designated Nationals (SDNs) between 2010 and 2012. The agency presumably learned of these from other U.S. financial institutions, which blocked the transfers and probably helped Citigroup’s settlement position.  

Fresh on that settlement’s heels came one with Zulutrade, Inc., a Delaware-incorporated foreign exchange (FX) platform operator.

Zulutrade, apparently ignorant of U.S. sanctions against Iran, Sudan, and Syria, maintained trading accounts for over 400 people from those countries and facilitated FX trades and funds transfers on their behalves. The company had no sanctions compliance program in place. Zulutrade did not voluntarily disclose its actions to OFAC, and agreed to pay the agency $200,000 to settle the matter.

OFAC did not deem either the Citigroup or the Zulutrade case to be egregious, and considered mitigating factors in both. These included remedial actions taken subsequent to the compliance failures, clean records for the five years prior, and cooperation with the agency’s investigations. OFAC also took into account Zulutrade’s small size and limited business operations when considering its “reckless” actions.

Citibank was not so fortunate in that regard, with OFAC citing its scale and sophistication as aggravating factors in the case. This was despite no Citigroup managers or supervisors being aware of the apparent violations when they occurred. By contrast, senior management at Zulutrade apparently “had reason to know of the conduct” that led to its brush with the law.

These settlements came during a period in which OFAC’s licensing and policy divisions are largely consumed with crafting and implementing sanctions against Russia. They therefore serve as a reminder that while Eastern Europe might be dominating news headlines, OFAC is still keeping a watchful eye on what U.S. entities and individuals are doing in the rest of the world.