Yesterday, in its latest Enforcement Information, the Office of Foreign Assets Control (OFAC) highlighted a recent settlement with the National Bank of Pakistan’s New York Branch. With consideration given to aggravating and mitigating factors, the parties settled for the $28,800 of the total base penalty amount of $64,000.
According to OFAC, between June 2013 and January 2014, NBP violated 594.201 of the Global Terrorism Sanctions Regulations when it processed seven funds transfers totaling $55,952.14 for LC Aircompany Kyrgystransvania. Kyrgyz Trans Avia airlines was designated in March of 2013 under Executive Order 13224 for providing support to Mahan Air. Despite the fact that the OFAC designation also included the a.k.a. Kyrgystranvania, NBP’s OFAC interdiction filter failed to flag the designation all seven times. OFAC considered the failure of the system as an aggravating factor and perhaps rightfully so.
In September of last year, OFAC director, Adam Szubin noted the difficulty for banks to stay in compliance with the growing sanctions programs. Szubin explained that unintentional accidents would not lead to an enforcement action but that “benign neglect” would be a varying factor. In NBP’s case, the bank’s inability to flag a designees alias could be indicative of such neglect and a more widespread compliance issue.
However, OFAC also took into consideration NBP’s clear record for the past five years, the fact that no supervisor or manager was aware of the violation and the remedial measures taken by NBP to enhance their interdiction filter as mitigating factors.
Though this particular situation was considered a non-egregious case with a meager penalty, it does stand as a reminder to other financial institutions of the importance of a well-maintained internal compliance system. Banks will not be penalized for “innocent slipups” but recklessness or neglect can often come with a price tag.