The internet is abuzz with news of the announcement yesterday that Standard Chartered Bank (SCB) has settled their allegations of sanctions violations with the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) for $132 million dollars. While certainly not the largest OFAC settlement in history, the SCB penalty is still quite significant, particularly, given the fact that SCB had already settled banking violations with the State of New York a few months ago for $327 million dollars. So what exactly were the OFAC violations leading to this penalty? I have broken them down below:

1. Kingpin Sanctions Violations. In two separate sections within the OFAC-SCB settlement agreement, there is acknowledgment of potential violations under the Foreign Narcotics Trafficking Kingpin Sanctions Regulations (FNTKSR), for processing transactions on behalf of Connect Telecom General Trading, a Specially Designated Narcotics Trafficking Kingpin (SDNTK).

Dates: 2/28/11-4/5/11
Violation: 31 C.F.R. 598.203
Number of Transactions: 8
Transactions Value: $243,506.69

2. Burma Sanctions Violations. SCB also processed a few transactions through the U.S. which were related to the exportation of financial services to Burma.

Dates: 8/5/03-5/24/05
Violation: 31 C.F.R. 537.202
Number of Transactions: 5
Transactions Value: $59,642

3. Sudan Sanctions Violations. SCB also processed transactions through the U.S. related to the exportation of services to Sudan.

Dates: 1/4/01-11/13/07
Violation: 31 C.F.R. 538.205
Number of Transactions: 283
Transactions Value: $96,665,537

4. Libya Sanctions Violations. SCB process transactions through the U.S. related to the exportation of goods, services, and technology to Libya. The Libya sanctions prohibition SCB violated was repealed in 2005.

Dates: 1/11/01-4/27/04
Violation: 31 C.F.R. 550.202 (repealed in 2005)
Number of Transactions: 135
Transactions Value: $12,349,361

5. Iran Sanctions Violations. SCB is getting the most heat for its dealings with Iran which included over 60,000 transactions. However, as acknowledged in the settlement agreement the vast majority of those transactions were authorized under a then existing general license for U-Turn transactions. That said SCB did also process some transactions related to the exportation of services to Iran.

Dates: 1/26/01-12/31/07
Violation: 31 C.F.R. 560.204
Number of Transactions: 488
Transactions Value: $24,002,250

As for your final numbers….

Date Range of Violations: January 4, 2001 through April 5, 2011.
Sanctions Programs Violated: 5
Number of Transactions: 919
Total Value of Transactions: $133,320,296.69
Penalty: $132,000,000 which equals approximately 99% of the transaction value.

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@ferrariassociatespc.com.