Credit Agricole to pay $1.1M to settle sanctions violations by two subsidiaries

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) settled apparent sanctions violations with CA Indosuez Switzerland for $720,258, while Monaco-based CFM Indosuez Wealth will pay $401,039.

CA Indosuez was accused of operating 17 banking and securities accounts services for three years for customers based in Cuba, Ukraine (Crimea region), Iran, Sudan, and Syria. CFM Indosuez allegedly operated 11 banking and securities accounts for 4 1/2 years for customers in Cuba, Iran, and Syria.

Both subsidiaries conducted business in U.S. dollars on behalf of these customers through the U.S. financial system, including through U.S. correspondent banks and U.S. registered brokers or dealers in securities, OFAC said in a press release Monday.

The subsidiaries voluntarily self-disclosed the violations, which the regulator deemed nonegregious.

Compliance considerations: According to the enforcement release for CA Indosuez, following a periodic oversight review conducted by the subsidiary’s compliance department, 17 of the firm’s customers were identified as living in sanctioned jurisdictions. The business “had reason to know that these transactions involved clients residing in sanctioned jurisdictions because at the time of the apparent violations the account holders’ know your customer (KYC) files included corresponding address information indicating their residence in sanctioned jurisdictions.”

Despite having that information, CA Indosuez from 2013-16 conducted 240 securities transactions totaling more than $2 million with customers in sanctioned jurisdictions and 33 commercial transactions with correspondent banks worth more than $1 million, according to OFAC.

Similarly, CFM Indosuez from 2011-16 conducted 410 securities transactions worth nearly $1 million with customers in sanctioned jurisdictions and 16 commercial transactions with correspondent banks totaling more than $267,000, according to its enforcement release.

OFAC said while Crédit Agricole had a functioning and well-designed global sanctions compliance program, neither of its subsidiaries fully implemented it during the relevant years. During those time periods, some payments to customers in sanctioned jurisdictions were blocked but securities transactions were not.

As a result, customers in sanctioned jurisdictions “were able to continue to purchase and sell securities through the U.S. financial system” and receive related payments through the subsidiaries until Crédit Agricole “took further steps to prevent such payments,” OFAC said.

As part of OFAC’s investigation, CA Indosuez and CFM Indosuez each conducted a compliance-related audit and provided well-organized responses to the agency’s requests for information, it said. Both subsidiaries agreed to toll the statute of limitations on the oldest violations.

In addition, both subsidiaries undertook “extensive remedial measures” in response to the violations, including updating instructions for escalating transactions in any currency in sanctioned jurisdictions; implementing a process to prevent all securities-related payments from being credited to the individual accounts of residents in sanctioned jurisdictions; and implementing Crédit Agricole’s risk control framework that identifies high-risk countries and sets minimum standards for supervision and its procedures for screening of customer databases. The subsidiaries also each implemented a new commercial screening tool that automatically screens a customer’s country of influence against sanctioned jurisdictions.

In 2015, Crédit Agricole paid a total of $787.3 million in criminal and civil penalties to the Department of Justice and a handful of other agencies for violating U.S. economic sanctions in Sudan, Iran, Burma (Myanmar), and Cuba.

Crédit Agricole response: A spokesperson for Crédit Agricole confirmed the settlement between the bank and OFAC regarding its subsidiaries and said the bank “has conducted internal reviews on a regular basis and has cooperated with OFAC.”

“The processes of the transactions have been identified, and the bank immediately took remedial actions. Indosuez has enhanced internal training and procedures related to the sanctions programs,” the spokesperson said in an emailed statement.