A few weeks ago I wrote a blog posting suggesting that perhaps the era of massive penalties and settlement for apparent violations of U.S. economic sanctions administered by the United States Department of the Treasury Office of Foreign Assets Control (OFAC) had subsided. This week OFAC proved that the suggestion was premature, when it announced that financial giant JPMorgan Chase Bank was paying $88.3 million to settle allegations of numerous apparent sanctions violations dating back to the mid-2000s.

According to the announcement issued by OFAC, JPMorgan Chase potentially violated the Cuban Assets Control Regulations (“CACR”), the Weapons of Mass Destruction Proliferators Sanctions Regulations (“WMDPSR”), the Global Terrorism Sanctions Regulations (“GTSR”), the Iranian Transactions Regulations (“ITR”), the Sudanese Sanctions Regulations (“SSR”), the Former Liberian Regime of Charles Taylor Sanctions Regulations (“FLRCTSR”), and the Reporting, Procedures, and Penalties Regulations (“RPPR”). The potential violations occurred between December 15, 2005, and March 1, 2011.

Among these potential violations were the processing of 1,711 wire transfers totaling approximately $178.5 million involving Cuban persons in apparent violation of the CACR. Although JPMorgan Chase management was made aware of the transactions, they took no action to prevent further violations. Moreover, they failed to report the potential violations to OFAC.

Furthermore, in 2009, JPMorgan Chase made a trade loan valued at approximately $2.9 million to the bank issuer of a letter of credit in which the underlying transaction involved a vessel that had been identified as blocked pursuant to the WMDPSR due to its affiliation with the Islamic Republic of Iran Shipping Lines (“IRISL”). Although JPMC supervisors and managers determined that this trade loan was likely an apparent violation of the WMDPSR they did not file a voluntary self-disclosure until a few days prior to the repayment of the loan.

To make matters worse JPMorgan Chase failed to provide responsive documents to OFAC in response to an OFAC administrative subpoena. This is despite the fact that they were asked for the exact responsive documents several times by OFAC.

OFAC determined that these apparent violations were egregious because of reckless acts or omissions by JPMorgan Chase. However, there were other apparent violations for which JPMorgan Chase which OFAC did not consider to be egregious. These included JPMorgan Chase’s failure to appropriately block or reject nine wire transfers totaling $609,308. Five of these apparent violations were voluntarily self-disclosed to OFAC.

OFAC did mitigate the total potential penalty based on JPMorgan Chase’s substantial cooperation, including JPMorgan Chase’s lack of a recent history of sanctions violations, and their entering into tolling agreements with OFAC.

This is the second time this week where I have written about a company being aware of OFAC violations and electing to take no action to prevent future violations and/or self-disclose the apparent violations to OFAC. While I am not saying that this penalty could have been completely avoided, actions to remedy and prevent apparent violations and voluntarily self-disclosure of those violations are both factors considered under OFAC’s Enforcement Guidelines. This penalty could have been significantly reduced had JPMorgan Chase taken the apparent violations more seriously from the beginning and not tried to hide the ball from OFAC during the investigatory process.

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.