Swiss-based global private banking group EFG International agreed to pay more than $3.7 million as part of a settlement with the Treasury Department’s Office of Foreign Assets Control (OFAC) addressing apparent violations of U.S. sanctions against Cuba and two blocked individuals.
In an enforcement release published Thursday, OFAC alleged EFG processed securities-related transactions worth nearly $30 million on behalf of customers based in or linked to Cuba. The agency said EFG also processed transactions for a Chinese national sanctioned under the Kingpin Act, as well as a person blocked under OFAC’s Russia sanctions program.
OFAC said EFG “failed to exercise due caution or care” by not properly screening its clients who were blocked by U.S. sanctions. The firm “knew or had reason to know that it held securities on behalf of blocked persons” but failed to notify U.S. counterparties that those persons benefitted from the transactions, the agency said.
EFG voluntarily self-disclosed the apparent violations, and OFAC determined they were “non-egregious.” The agency said it would suspend $1 million of the settlement total, “pending satisfactory completion of certain compliance commitments.”
The details: From 2014-18, EFG processed 873 securities-related transactions—totaling approximately $30.4 million—through U.S. custodians or involving U.S. person counterparties that appeared to violate U.S. sanctions, OFAC said.
EFG subsidiaries in the Bahamas, Cayman Islands, Luxembourg, Monaco, and Switzerland processed 727 securities-related transactions on behalf of clients who resided in Cuba or whose beneficial owners were Cuban nationals, the agency said. More than 400 of the transactions involved EFG Miami in a brokerage capacity.
“Because trades and other corporate actions completed through these omnibus accounts were generally made in the name of EFG, and not its underlying clients, [the] U.S. market participants were unaware that they were ultimately processing securities transactions on behalf of persons sanctioned by OFAC,” the release said.
EFG processed 141 securities transactions for a Chinese national designated as a narcotics trafficking kingpin and five for a sanctioned Russian individual, because of alleged omissions or control failures that did not identify those transactions benefitted persons sanctioned after their accounts had been opened.
Compliance considerations: EFG cooperated with OFAC and conducted an internal investigation into the apparent violations.
The firm implemented remedial measures, including internal restrictions to prevent credits/debits to sanctioned client accounts and requiring compliance approval for any account activity of customers who are not blocked but present heightened sanctions risk, OFAC said. The firm also established policies and procedures to notify U.S. custodians and other U.S. parties in writing when an account benefitted clients subject to U.S. sanctions.
EFG instituted a risk control framework to identify high-risk countries and apply enhanced due diligence to clients with exposure and aligned its assessments and controls to follow OFAC’s framework for compliance commitments.
Firm response: EFG said in an emailed statement the discounted settlement total would have no impact on its financial statement.
“The settlement amount reflects OFAC’s determination that EFG’s conduct was non-egregious, voluntarily self-disclosed, and recognizes EFG’s significant remedial actions,” it said.
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