CFM Indosuez Wealth OFAC Settlement: $401K (2022)

CFM is a financial institution based in Monaco that specializes in wealth management and corporate and investment banking. During the relevant period, CFM served 11 individual clients located in Iran, Syria, and Cuba, collecting account holders' KYC data, including address information indicating their location. Despite having this information, from December 2011 until July 2016, CFM allowed these customers to purchase securities issued by U.S. companies through U.S. broker-dealers and other U.S. market participants, in 410 transactions totaling $966,491. CFM also allowed these customers to engage in 16 commercial transactions totaling approximately $267,476 through U.S. banking correspondents.

Although CASA and CACIB had implemented a global sanctions compliance program requiring their subsidiaries to adhere to it, CFM did not fully implement it during the relevant period. CFM failed to fully restrict USD-cleared payments related to the 11 personal accounts maintained for customers residing in sanctioned jurisdictions. In 2015, CFM implemented internal restrictions aimed at preventing certain payments on those accounts, but later discovered that these restrictions did not prevent securities-related payments from being credited, allowing customers to continue to purchase and sell securities through the U.S. financial system and to receive related dividend and coupon payments until CFM took further steps.

Between December 15, 2011 and July 1, 2016, CFM processed 426 transactions totaling approximately $1,233,967 on behalf of individuals ordinarily resident in Cuba, Iran, and Syria, in apparent violation of the Cuban Assets Control Regulations, 31 C.F.R. § 515.201, the Iranian Transactions and Sanctions Regulations, 31 C.F.R. §§ 560.203 and 204, and the Syrian Sanctions Regulations, 31 C.F.R. § 542.207.

The statutory maximum civil monetary penalty applicable in this matter is $106,853,346. OFAC determined that CFM 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 equals the sum of one-half of the transaction value for each apparent violation, which is $616,983. The settlement amount of $401,039 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 compliance controls are implemented consistently across relevant products and lines of business, where relevant on a risk basis. This case also demonstrates how financial institutions can benefit from integrating KYC data into their sanctions screening platforms, and highlights the value of testing and auditing controls to identify sanctions compliance related problems, reporting them to OFAC, and proactively implementing appropriate remedial measures. 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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