In a year of absolutely huge fines and settlements for violations of sanctions programs, the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) saved the best (or biggest) for last. This week OFAC announced a whooping $536 million dollar settlement with Credit Suisse AG for violating OFAC administered sanctions. This settlement represents the largest sanctions settlement for OFAC ever. Famed New York District Attorney Robert Morgenthau, who retires at the end of this month, played an integral in buliding the case against Credit Suisse. I wrote a few months ago about how Morgenthau was working on building cases involving both Iran and Venezuela. Well this settlement seems to be part of the fruits of his work as the majority of transactions which Credit Suisse facilitated involved Iran.

OFAC contends that Credit Suisse’s actions were egregious in light of the substantial economic benefit to sanctioned parties, the scope and severity of the apparent violations and the awareness of the conduct within the bank. According to Treasury, Credit Suisse engaged in intricate procedures to ensure that the involvement of sanctioned parties was not visible to the U.S. banks involved in funds transfers. Indeed, Treasury reports that the bank’s London affiliate went as far as utilizing code names to disguise the identities of sanctioned entities. These practices are indicative of the Iranian Government’s use of deception to evade sanctions. Iran has had great success in persuading banks to assist in such schemes; although OFAC does admit that sometimes the banks assisting Iran are not aware of what is occurring. Other deceptive practices Iran has been involved in includes the removal of Iranian bank names from transactions so that their involvement goes undetected. Furthermore, even Iran’s major shipper, the Islamic Republic of Iran Shipping Lines, has changed the names of their ships and edited their bills of lading to skirt scrutiny.

I have recieved numerous calls particularly in the last year or so where individuals have requested my services in circumventing the sanctions. My answer has always been a resounding NO. The consequences, as can be seen by this settlement, are too severe. Moreover, there are criminal penalties that can be brought against though who are found to have violated the sanctions programs. In addition, with OFAC granting a majority of the licenses applied for, engaging in deceptive practices to evade U.S. economic sanctions is simply not worth the risk.

I have often written on how the private sector is the most important player in the enforcement of U.S. economic sanctions. Without their active participation OFAC’s job becomes nearly impossible. Treasury in thier press release on the Credit Suisse settlement reiterated this point, stating, “But it is the private sector and particularly financial institutions that are on the front lines. The business decisions they make not only affect their reputations, but also the integrity of the financial system as a whole. This is a heavy burden to carry – and it is one that should counsel a very careful weighing of the risks before continuing or taking on any business with Iranian entities.”

The author of this blog is Erich Ferrari, an attorney specializing in OFAC litigation. If you have any questions please contact him at 202-280-6370 at 202-351-6161 or ferrari@ferrari-legal.com.