Today, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) settled a number of violations of OFAC administered sanctions with ING Bank (ING). The amount of this settlement: a whopping $619 million! This settlement amount was meant to settle the 20,452 apparent violations that ING engaged in between 2002-2007 and constitutes the largest settlement in OFAC history.

According to OFAC, the reasons for such a high penalty included ING Bank’s level of commercial sophistication, their unwillingness to cooperate with OFAC in the early stages of the investigation, and the fact that ING’s senior management were aware of the apparent violations. OFAC did give ING credit for the fact that a number of the violations would have been eligible for licensing and ING began cooperating during the later stages of the investigation.

OFAC employs enforcement guidelines to calculate the penalties they administer. These guidelines require OFAC to employ a four part matrix in order to determine the level of the base penalty. This base penalty matrix takes into account whether the conduct was egregious in nature and whether or not the party engaged in the conduct voluntarily self-disclosed their apparent violation. If a violation was self-disclosed and was egregious then the base penalty would be half of the value of the transaction capped at $125,000 per violation. If it was egregious and self-disclosed then the base penalty would be half of the statutory maximum. If the violation was not self-disclosed, but also not egregious, there is a schedule to follow which provides the base penalty. If the penalty was both egregious and not self-disclosed then OFAC uses the statutory maximum in determining the base penalty. In this case, ING Bank’s base penalty was determined to be $665,992,444 for $1,673,488,542.02. As such it appears that OFAC found that ING voluntarily self-disclosed the violations, but that the conduct was egregious.

What is interesting to consider is the extraterritorial application of OFAC administered sanctions regulations. According to the OFAC press notice, apparent violations involved ING’s commercial banking offices in The Netherlands, Belgium, France, Curacao, and Cuba, and did not involve ING’s insurance or banking operations in the United States. ING is a Dutch bank, although it does have extensive operations in the United States. Regardless, OFAC and other law enforcement agencies went after ING for their sanctions violations and ING paid the price. It just goes to show you that if you have a nexus to the United States and aren’t abiding by OFAC’s regulations they will come after you. No one is safe from the long arm of OFAC.

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.