The Office of Foreign Assets Control (“OFAC”) has demonstrated its ability to multi-task — designing, implementing and enforcing a comprehensive sanctions regime against Russia after its invasion of Ukraine, and maintaining its “regular” enforcement program.
In a recent two-fisted settlement, OFAC reached two separate settlements with Credit Agricole companies.
First, OFAC reached a settlement with Credit Indosuez Switzerland S.A. (“CAIS”), an indirect subsidiary of Swiss-based Credit Agricole and Investment Bank (“CAIB”), for $720,258 for violating sanctions related to Ukraine, Cuba, Iran, Sudan and Syria.
Second, OFAC settled with CFM Indosuez Wealth (“CFM”), an indirect subsidiary of Monaco-based Credit Agricole Corporate and Investment Bank (“CACIB”), for $401,039 for violating sanctions against Cuba, Iran and Syria.https://home.treasury.gov/system/files/126/20220926_CFM.pdf
Between 2013 and 2016, CAIS operated U.S. dollar banking and securities accounts for 17 customers in sanctioned jurisdictions through U.S. correspondent banks and U.S. registered brokers. In particular, CAIS permitted customers in sanctioned countries to buy securities through U.S. companies. CAIS collected KYC data but still completed the transactions. CAIS conducted 240 transactions worth more than $2 million, and 33 commercial transactions worth more than $1 million.
In the other settlement, CFM operated dollar banking and securities accounts for 11 customers in Cuba, Iran and Syria. CFM collected KYC data for each customer but allowed the customers to buy securities through U.S. companies over a five year period, from 2011 to 2016.provided otherwise prohibited services. CFM processed 410 transactions worth about $966,000 and 16 commercial transactions worth about $267,000.
CAIS and CFM were required to follow their parent companies’ compliance policies, but they did not implement the procedures. As a result, the customers who were located in sanctioned jurisdictions were able to continue to engage in securities and commercial transactions involving the U.S. financial system.
CAAIS and CFM discovered the prohibited accounts during a “periodic” review conducted by their compliance departments. Even though both companies maintained internal restrictions to prevent prohibited transactions, they later discovered that the restrictions did not cover securities-related transactions.
CAIS and CFM voluntarily disclosed the violations. CAIS and CFM implemented extensive remedial measures to enhance their respective compliance programs, and implemented an automated screening tool. Both companies also cooperated with OFAC and agreed to toll the statute of limitations while completing the investigation.
As part of the remediation efforts, each company: (1) completed implementation of their respective compliance program instructions requiring escalation of every transaction in any currency involving client residing or established in a sanctioned jurisdiction; (2) notified U.S. security custodians of customer accounts requiring restrictions; (3) implemented a process to prevent all securities-related payments from being credited to individual accounts of residents in sanctioned jurisdiction; (4) implemented a country risk control framework to identify high-risk countries; (5) adopted procedures for screening of customers; (6) implemented SWIFT’s payment data quality tool; and (7) implemented a new commercial screening tool.