Emigrant Bank OFAC Settlement: $31.9K (2023)

In 1995, Emigrant opened a CD account for two Iranian residents, which it renewed every five years until closing the account in 2021. During this period, the accountholders provided ample information to Emigrant indicating their Iranian residency, including letters showing their Iranian address and tax forms reflecting an address in Iran. Emigrant demonstrated its knowledge of the Iranian residency and addresses through various documents, including an interest check, tax documents, periodic statements, and internal discussions and decisions.

On June 25, 2016, the accountholders sent a letter requesting a wire transfer from the account to a U.S. resident account at another U.S. bank. This transaction triggered Emigrant's screening filter, which stopped the payment for review. Prior to this, Emigrant's compliance processes had not flagged any account activities for potential sanctions issues. When the beneficiary bank requested additional information regarding the Iranian address, Emigrant analyzed the account and erroneously concluded that the transfers were permissible as personal remittances and processed the payment forward.

Separately, Emigrant changed the account's country code in its customer database from the United States to Iran. Emigrant's compliance program initially failed to flag this address change for sanctions issues. In April 2019, Emigrant upgraded certain sanctions screening platforms, which triggered an alert on the account due to the accountholders' country of residence being listed as Iran. However, Emigrant employees overrode the alert because they relied on the erroneous guidance from 2016. In June 2021, Emigrant management became aware of the account's Iranian status due to a regulatory examination and initiated an investigation.

Between June 30, 2017 and March 31, 2021, Emigrant processed 30 transactions through the account totaling $91,051.13, in apparent violation of the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. § 560.204.

The statutory maximum civil monetary penalty applicable in this matter is $9,928,410. OFAC determined that the Apparent Violations were voluntarily self-disclosed and were non-egregious. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A, the base civil monetary penalty equals the sum of one-half of the transaction value for each Apparent Violation, which is $45,526. The settlement amount of $31,867.90 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This case highlights the importance of properly vetting accountholders and understanding the restrictions on "Iranian accounts," i.e., accounts of persons who are ordinarily resident in Iran while they are located in Iran, or of persons blocked pursuant to 31 C.F.R. § 560.211, maintained on the books of a U.S. depository institution or U.S.-registered broker or dealer in securities.

U.S. sanctions on Iran prohibit U.S. persons, including financial institutions, from providing services to Iran. This prohibition explicitly includes performing services with respect to Iranian accounts. As OFAC notes in 31 C.F.R. § 560.517, and further explained in FAQ 37, Iranian accounts must be restricted, allowing only for maintenance of the accounts, including the payment of interest and the debiting of service charges, or closing via a lump sum transfer to the accountholder.

Although the ITSR does authorize personal remittances to or from Iran under certain conditions pursuant to 31 C.F.R. § 560.550, the general license does not authorize debiting or crediting an Iranian account like the one at issue here. Instead, personal remittances may be sent by or to U.S. depository institutions or registered brokers or dealers in securities, and not by any other U.S. person; remittances may be sent to or from a non-U.S. person in a third country before being transferred to Iran or the United States, or the funds may be hand-carried in limited circumstances.

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