Sometime last year, I wrote a blog posting pontificating about a reduction in OFAC civil penalties and that the era of big OFAC penalties might have been at an end. Much to my chagrin, shortly after I wrote that posting JPMorgan Chase paid $88.3 million dollars in penalties to settle allegations of apparent OFAC violations. As such, I thought maybe I was wrong about the whole big penalty era being over idea. However, now that we are in 2012 and we have the benefit of looking back at all of 2011, it does appear that we saw a significant decrease in OFAC penalties from the two years prior.

In 2011, OFAC issued/received $91,650,055 USD in penalties or settlements. Of this there were 21 penalties imposed consisting of 32 sanctions violations. Violations of the Iranian Transactions Regulations (ITR) comprised 16 violations or 50% of all violations. Also notable, were 6 violations of the Sudanese Sanctions Regulations, and 5 violations of the Cuban Assets Control Regulations.

Compare the above with the fact that in 2010, OFAC issued/received $200,735,996 USD in penalties or settlements and in 2009 OFAC issued/received $772,442,861 USD in penalties or settlements. As such, it does indeed seem that OFAC violations are not causing the major fines and settlements that we have seen in recent years. However, it should be remembered that prior to 2009, OFAC penalties and settlements were in the low millions in terms of dollar amounts so in recent years the numbers have jumped significantly over prior years.

While I think we will continue to see major OFAC penalties in the future, I think the days of the hundreds of millions of dollars in fines are over for now. This does not mean that that compliance and due diligence efforts should be relaxed. Quite the contrary, I believe it is because of heightened due diligence and compliance efforts that OFAC has not had to issue as many large penalties or settlements as in previous years.

Another telling aspect of these numbers is that the ITR violations make up half of the enforcement actions. It shouldn’t surprise anyone that enforcement of Iran sanctions remains one of OFAC’s primary focuses. With the calls on increased pressure coming from Congress I think we will continue to see more investigations into apparent violations of Iran sanctions and more enforcement actions as a result of such violations. Furthermore, at a recent conference, an OFAC official stated that in 2010 OFAC initiated 1,200 investigations. This is over 200 more than in 2009 when OFAC initiated 1,000 new investigations. It will be interesting to see this year how the number of enforcement actions increases vis a vis the higher number of initiated investigations and how many of those will be Iran related.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.