Barclays Bank Plc OFAC Settlement: $2.5M (2016)

From July 2008 to September 2013, Barclays processed 159 transactions totaling approximately $3,375,617 to or through financial institutions located in the United States — including Barclays' New York branch ("Barclays NY") — for or on behalf of corporate customers of Barclays Bank of Zimbabwe Limited ("BBZ") that were owned 50 percent or more, directly or indirectly, by a person on OFAC's SDN List, in apparent violation of § 541.201 of the Zimbabwe Sanctions Regulations, 31 C.F.R. part 541.

The conduct arose from a breakdown in beneficial ownership screening. Beginning in 2006, Barclays UK relied on BBZ's electronic customer records to perform sanctions-related screening for cross-border transactions. BBZ's electronic system was initially unable to capture related-party or beneficial owner data for corporate customers. Repeated attempts to correct the shortcoming — including a 2009 "work-around" — were ineffective and little used. BBZ's KYC procedures were also ambiguous regarding the identification of beneficial owners, resulting in gaps in both paper files and electronic records.

On July 25, 2008, OFAC designated Industrial Development Corporation of Zimbabwe (IDCZ) under Executive Order 13469. At the time of designation, BBZ maintained USD-denominated accounts for three corporate customers owned 50 percent or more, directly or indirectly, by IDCZ. Because beneficial ownership information was not captured in BBZ's electronic system, Barclays UK was unable to screen for this nexus and continued processing USD transactions for these customers to or through the United States.

By no later than 2011, Barclays was aware of weaknesses in BBZ's KYC practices. During a remediation effort that year, BBZ updated paper files for one customer account to reflect IDCZ's beneficial ownership, but failed to enter this information into the electronic system. Beginning in October 2012, U.S. financial institutions blocked four funds transfers Barclays NY had processed for one of the IDCZ-owned entities. Although Barclays NY investigated and confirmed the IDCZ ownership, it failed to properly upload identifying information for the blocked person into its sanctions screening filter. Barclays NY subsequently processed three additional transactions involving the same party between November 2012 and September 2013, all of which were blocked by other U.S. financial institutions.

Barclays did not voluntarily self-disclose the apparent violations to OFAC. OFAC determined that the apparent violations constitute a non-egregious case. The total base penalty amount for the 159 apparent violations was $5,029,000. The settlement amount of $2,485,890 reflects OFAC's consideration of aggravating and mitigating factors pursuant to the General Factors Affecting Administrative Action under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A.

This settlement demonstrates that an enforcement response may be particularly appropriate, even when an individual or entity is not included on the SDN List, in response to apparent violations in which: (a) the apparent violator is an institution that maintains direct customer relationships for entities that are beneficially owned, directly or indirectly, 50 percent or more by one or more SDNs, and is processing or routing transactions to or through the United States on behalf of such customers; (b) the institution's own records clearly demonstrate or otherwise clarify the SDN ownership of the customer, but the institution failed to act on the information; and/or (c) information concerning the SDN ownership of the customer is publicly available and allows intermediary banks to identify and block such transactions.

This enforcement action highlights the importance for institutions with operations in countries with a significant presence of persons (individuals and entities) on the SDN List to take appropriate measures to ensure compliance with U.S. economic sanctions when processing transactions for or on behalf of their customers to, through, or within the United States.

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