Well I guess the massive fine The United States Department of Treasury Office of Foreign Assets Control (“OFAC”) dished out to DHL earlier this month was not an apparition. Australia and New Zealand Bank Group, Ltd.(“ANZ”), have just settled allegations of violating the Sudanese Sanctions Regulations and Cuban Assets Control Regulations to the tune of $5.75 million! That brings OFAC’s estimated penalties and settlements up to about $15 million for the month of August alone.

The activities alleged to have violated the sanctions programs occurred between 2004 to 2006 and involved ANZ’s processing of transactions through U.S. correspondent accounts. ANZ actively manipulated the messages related to the Sudanese transactions by removing references to Sudan or the names of entities subject to sanctions in the United States, thereby concealing the identities of the targets of U.S. sanctions and impeding the ability of U.S. banks to detect these violations. The settlement covers 31 transactions in the aggregate amount of approximately $106 million alleged to have violated the Sudanese Sanctions Regulations and the Cuban Assets Control Regulations.

According to the civil penalties release, OFAC mitigated the total potential penalty based on ANZ’s substantial cooperation, its prompt and thorough remedial response, and the fact that ANZ had not been subject to an OFAC enforcement action in the five years preceding the transactions at issue. However, it should be noted that ANZ did not voluntarily self-disclose the apparent violations, but they did cooperate by ANZ conducting an extensive review of the transactions. This review identified additional apparent violations of the Sudanese Sanctions Regulations of which OFAC was not aware, as well as apparent violations of the Cuban Assets Control Regulations, which ANZ voluntarily self-disclosed to OFAC.

According to the release by OFAC:

“As part of its remedial response, ANZ re-engineered its current operating model to enhance its ability to identify and resolve operational gaps and weaknesses. ANZ enhanced key OFAC procedures and policies to establish more effective controls with respect to potential OFAC violations. As part of its settlement with OFAC, ANZ has agreed to examine and, as necessary, further revise its policies and procedures to ensure, to the best of its ability, that transactions that would be in violation of OFAC’s regulations are not processed by or through United States financial institutions. ANZ will report findings of its examination to OFAC. The Australian Prudential Regulation Authority, ANZ’s primary Australian regulator, has agreed to review the results of the examination conducted by ANZ and monitor the resolution of any adverse findings.”

Ok, the word is out. OFAC is playing for keeps. More huge penalties are likely on the horizon and this should be a wake up call to a lot of foreign companies falling under U.S. jurisdiction that have been running afoul of these regulations. However, what I like about this release is the final paragraph were it talks about remedial steps. That, in my opinion, is a very positive step in the right direction.

These days OFAC seems to be working with the private sector to effectively implement the regulations, rather than engaging in, as Clif Burns so aptly put it, “regulation by ambiguity”. Another example of this transition is that it has recently been announced that OFAC officials will be speaking and answering questions at this year’s ACAMS Internaional Anti Money Laundering Compliance Conference in Las Vegas. It seems that high ranking OFAC officials have adopted this new strategy as a result of reading the suggestions on this blog over the past six months…….or, maybe not. However, they are now moving towards a course of action that I have long advocated and I am glad to see OFAC providing more guidance to the private sector.