CA Indosuez (Switzerland) S.A. OFAC Settlement: $720.3K

CAIS served 17 individual clients located in Iran, Syria, Sudan, the Crimea region of Ukraine, and Cuba. Despite account holders' know-your-customer (KYC) files containing address information indicating their residence in sanctioned jurisdictions, CAIS allowed these customers to purchase securities issued by U.S. companies through U.S. broker-dealers and other U.S. market participants (240 transactions totaling $2,050,780), and to engage in 33 commercial transactions totaling approximately $1,025,400 through U.S. banking correspondents.

Although CASA and CACIB had implemented a global sanctions compliance program requiring subsidiaries to adhere to it, CAIS failed to fully implement it during the relevant period. CAIS failed to fully restrict USD-cleared payments related to the 17 personal accounts maintained for customers residing in sanctioned jurisdictions. In 2014, CAIS implemented internal restrictions for accounts held by persons ordinarily resident in Cuba, Iran, Sudan, and Syria; Crimea was added in 2015. However, CAIS later discovered that these restrictions did not prevent securities-related payments from being credited to the accounts, allowing customers in sanctioned jurisdictions to continue to purchase and sell securities through the U.S. financial system and to receive related dividend and interest payments until CAIS took further steps.

Between April 2013 and April 2016, CAIS processed 273 transactions totaling approximately $3,076,180 on behalf of individuals ordinarily resident in Cuba, Crimea, Iran, Sudan, and Syria. This conduct resulted in apparent violations of the Cuban Assets Control Regulations, 31 C.F.R. § 515.201; Section 1(a)(iii) of Executive Order 13685 of December 19, 2014; the Iranian Transactions and Sanctions Regulations, 31 C.F.R. §§ 560.203 and 204; the Sudanese Sanctions Regulations, 31 C.F.R. § 538.205; and the Syrian Sanctions Regulations, 31 C.F.R. § 542.207.

The statutory maximum civil monetary penalty applicable in this matter is $64,062,841. OFAC determined that CAIS self-disclosed the Apparent Violations and that the Apparent Violations constitute a non-egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A, the base civil monetary penalty amount for this matter equals the sum of one-half of the transaction value for each Apparent Violation, which is $1,108,090. The settlement amount of $720,258 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This case demonstrates the importance for foreign financial institutions, including those operating in the securities industry, to implement and maintain effective sanctions compliance controls, especially if their lines of business involve transactions transiting the U.S. financial system. Financial institutions that do business in multiple jurisdictions and across a number of product lines should ensure that their compliance controls are implemented consistently across relevant products and lines of business, where relevant on a risk basis. This case demonstrates how financial institutions can benefit from integrating KYC data into their sanctions screening platforms. This case also highlights the value of testing and auditing controls to identify sanctions compliance related problems, reporting them to OFAC, and proactively implementing appropriate remedial measures. This case emphasizes that global subsidiaries, when instructed to implement a parent company's compliance policies, should do so in a timely and effective manner.

Consistent with FAQ 335, OFAC encourages firms operating in the securities industry, including securities intermediaries and custodians, to implement measures that mitigate the risk of providing services to, or dealing in property in which there is an ownership or other interest of, parties subject to U.S. sanctions. Such measures should be tailored to and commensurate with the sanctions risk posed by a firm's business activities.

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