JPMorgan Chase & Co. OFAC Finding of Violation (2018)

Between August 4, 2011 and April 29, 2014, JPMC processed 85 transactions totaling $46,127.04 and maintained eight accounts on behalf of six customers who were contemporaneously identified on the SDN List, in violation of the Foreign Narcotics Kingpin Sanctions Regulations, 31 C.F.R. part 598 (FNKSR), and the Syrian Sanctions Regulations, 31 C.F.R. part 542 (SSR).

From approximately 2007 to October 2013, JPMC used a vendor screening system that failed to identify these six customers as potential matches to the SDN List. The system's screening logic capabilities failed to identify customer names with hyphens, initials, or additional middle or last names as potential matches to similar or identical names on the SDN List. Despite strong similarities between the accountholder's names, addresses, and dates of birth in JPMC account documentation and on the SDN List, JPMC maintained accounts for, and/or processed transactions on behalf of, these six customers.

JPMC identified weaknesses in the screening tool's capabilities as early as September 2010 and implemented a series of enhancements during the period 2010 to 2012. In 2013, JPMC transitioned to a new screening system. In November 2013, JPMC re-screened 188 million clients' records through the new system, identified the transactions and accounts described above, and reported the violations to OFAC.

There is no monetary penalty associated with a Finding of Violation. The determination to issue a Finding of Violation to JPMC reflects OFAC's consideration of the following facts and circumstances, pursuant to the General Factors under OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. A Finding of Violation is appropriate given that JPMC facilitated and/or processed 85 transactions totaling $46,127.04 and maintained eight accounts on behalf of six customers on the SDN List; JPMC engaged in a pattern of conduct over a two-year period where the apparent violations stemmed from the same screening issue; although JPMC identified this screening issue and implemented multiple screening enhancements, it took over three years to fully address a known deficiency in the vendor-provided screening system; JPMC did not appear to have implemented adequate compensating controls to address the risk these screening deficiencies posed to the bank's operation of existing accounts or opening of new accounts; and JPMC is a large, sophisticated financial institution. OFAC also considered that no JPMC personnel, including managers or supervisors, appear to have had actual knowledge of the conduct that led to the violations; JPMC has not received a penalty notice or Finding of Violation from OFAC relating to substantially similar violations in the five years preceding the date of the conduct giving rise to the violations; and JPMC cooperated with OFAC's investigation, including by providing the initial disclosure of these violations, and executing a statute of limitations tolling agreement and an extension to the agreement.

This enforcement action highlights the importance of financial institutions remediating known compliance program deficiencies in an expedient manner, and when that is not possible, the importance of implementing compensating controls to mitigate risk until a comprehensive solution can be deployed.

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