UBS AG OFAC Settlement: $1.7M (2015)

From January 2008 to January 2013, UBS processed 222 transactions related to securities held in custody in the United States for or on behalf of an individual customer (the "Client") at UBS in Zurich, Switzerland, who had been designated by OFAC in October 2001 pursuant to Executive Order 13224. UBS had opened accounts for the Client in 1993 and 1994, prior to the designation, denominated in different currencies including USD. After the designation, UBS placed blocks and restrictions on the Client's accounts to comply with Swiss law restrictions, but continued to engage in investment-related activity on the Client's behalf, including processing USD securities-related transactions to or through the United States. These transactions included purchases and sales of U.S. securities, receipt of dividends on U.S. securities, and capital calls, management fees, and cash distributions in connection with a U.S. private equity investment.

UBS maintained a global OFAC policy requiring screening of all outbound and inbound funds transfers, but treated the securities-related transactions as internal transfers because they did not involve external parties. As a result, processing the Client's U.S. securities transactions never generated any alerts despite the Client's name appearing on the sanctions-related lists used to screen external funds transfers.

In March 2008, while investigating an unrelated matter at UBS's request, a U.S. custodian identified the Client as an individual on OFAC's SDN list, subsequently blocked the shares involved, and filed a report of blocked property with OFAC. In 2012, following the Client's removal from the Swiss sanctions list, UBS initiated account closure. During the process of initiating external wire transfers, UBS's sanctions filter generated alerts against the Client's name. UBS's Compliance department then reviewed the Client's account activity and discovered the bank had processed transactions related to U.S. securities over several years in which the Client had an underlying interest. OFAC determined that the disclosures were not voluntary self-disclosures because they were substantially similar to another apparent violation of which OFAC was already aware.

OFAC determined that the apparent violations constitute a non-egregious case and that the disclosures do not qualify as voluntary self-disclosures under the Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A, because they were substantially similar to another apparent violation of which OFAC was already aware. The total base penalty amount for the 222 apparent violations was $3,778,000. The settlement amount of $1,700,100 reflects OFAC's consideration of the facts and circumstances pursuant to the General Factors under OFAC's Economic Sanctions Enforcement Guidelines.

This enforcement action highlights the importance of institutions taking appropriate measures to ensure compliance with all applicable sanctions when they have operations or otherwise conduct business in multiple jurisdictions that have implemented sanctions against particular persons (individuals or entities) or countries. This action should also raise awareness regarding the sanctions obligations for foreign financial institutions — including those that purchase, sell, transfer, or otherwise transact in U.S. securities — that process transactions to or through the United States.

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