Nodus International Bank OFAC Finding of Violation

A person added to OFAC's SDN List in 2017 held several accounts with Nodus, including two time deposit accounts, a savings account, and an outstanding credit card balance, as well as an interest in certain securities issued by Nodus prior to the designation. Shortly after learning of the designation, Nodus's Board of Directors blocked the accounts and submitted a Report of Blocked Property to OFAC.

As part of its efforts to sever ties with the blocked person, Nodus sought to redeem the blocked person's securities and place the proceeds into a blocked account. Nodus understood that it needed a license from OFAC to deal in the blocked property and assured OCFI that it would apply for one. OCFI authorized Nodus to redeem the securities under its prudential regulatory authorities but noted it was not opining on the applicability of OFAC sanctions; Nodus's sanctions compliance officer relayed this to senior Nodus bank officials. Nodus, however, processed the securities redemption without obtaining a license. The proceeds were placed into a blocked account and were not accessible to the blocked person.

Separately, as a result of human error, Nodus allowed an automatic debit from one of the blocked person's blocked accounts to credit the blocked credit card account, then wrote off the balance of the blocked credit card account.

During OFAC's investigation, Nodus informed OFAC that it no longer maintained access to all records or communications related to the handling of the blocked property, as the bank's compliance officer had left and, unbeknownst to the bank, its systems had not effectively retained such records. Nodus also submitted several inconsistent Annual Reports of Blocked Property: its 2018 ARBP did not include the blocked credit card account, while its 2019 report did.

In total, Nodus engaged in three transactions totaling $50,271.29 in violation of § 591.202 of the VSR, 31 C.F.R. part 591; failed to maintain full and accurate records related to the handling of the blocked accounts in violation of § 501.601 of the RPPR, 31 C.F.R. part 501; and failed to report the blocked accounts accurately in violation of § 501.603(b)(ii).

OFAC determined that the appropriate administrative action was a Finding of Violation in lieu of a civil monetary penalty. The determination reflects OFAC's consideration of the General Factors Affecting Administrative Action set forth in OFAC's Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. Nodus voluntarily self-disclosed the VSR violations; the RPPR violations were not self-disclosed and came to light during OFAC's investigation.

This action highlights the importance of financial institutions' properly maintaining blocked property and records and filing accurate reports to OFAC. Financial institutions should ensure that they receive all necessary licenses from OFAC before dealing in blocked property and clearly communicate OFAC requirements among an institution's compliance and business lines.

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