Payoneer Inc. OFAC Settlement: $1.4M (2021)

Between February 4, 2013 and February 20, 2018, Payoneer processed 2,220 transactions totaling $793,950.70 in apparent violation of multiple OFAC-administered sanctions programs. Of these, 2,201 were payments for parties located in jurisdictions and regions subject to sanctions, including the Crimea region of Ukraine, Iran, Sudan, and Syria; 19 were payments on behalf of sanctioned persons on OFAC's SDN List.

The apparent violations, which related to commercial transactions processed by Payoneer on behalf of its corporate customers and card-issuing financial institutions, resulted from multiple sanctions compliance control breakdowns: (i) weak algorithms that allowed close matches to SDN List entries not to be flagged by its filter; (ii) failure to screen for Business Identifier Codes (BICs) even when SDN List entries contained them; (iii) during backlog periods, allowing flagged and pended payments to be automatically released without review; and (iv) lack of focus on sanctioned locations, especially Crimea, because it was not monitoring IP addresses or flagging addresses in sanctioned locations.

Payoneer's policies and procedures dating back as far as June 2015 specified that transactions involving parties in sanctioned locations were prohibited, but the testing and auditing conducted to verify that these policies and procedures were being implemented failed to identify the compliance deficiencies that led to the apparent violations.

These compliance deficiencies resulted in apparent violations of Section 1(a)(iii) and Section 2 of Executive Order 13685 of December 19, 2014; the Zimbabwe Sanctions Regulations, 31 C.F.R. § 541.201; the Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 C.F.R. § 544.201; the Iranian Transactions and Sanctions Regulations, 31 C.F.R. § 560.204; the now-repealed Sudanese Sanctions Regulations, 31 C.F.R. § 538.205; and the Syrian Sanctions Regulations, 31 C.F.R. § 542.207.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 $654,357,316. OFAC determined that 2,201 of the apparent violations were not voluntarily self-disclosed, 19 were voluntarily self-disclosed, and all were non-egregious. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines, the base civil monetary penalty amount applicable in this matter is $3,849,726. The settlement amount of $1,385,901.40 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This action highlights that money services businesses, like all financial service providers, are responsible for ensuring that they do not engage in unauthorized transactions prohibited by OFAC sanctions, such as dealings with blocked persons or property, or engaging in prohibited trade-related transactions with jurisdictions and regions subject to sanctions. To mitigate such risks, money services businesses should develop a tailored, risk-based sanctions compliance program predicated on at least five essential components: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training.

This enforcement action emphasizes the importance of effective screening not only for persons on the SDN List but also for sanctioned locations; ensuring that audits of OFAC compliance programs focus not only on persons on the SDN List but also on sanctioned locations; performing algorithm testing to be sure filters are flagging payments within expected parameters; screening for BIC codes, especially when OFAC includes them in SDN List entries; and holding flagged payments until they have been reviewed.

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