Ignoring compliance, Mashreqbank fined $100M for Sudan sanctions violations

According to the NYDFS’s consent order, between January 2005 and February 2009, Mashreq processed 1,747 payments, worth more than $4 billion, through U.S. financial institutions for Sudanese entities in violation of U.S. sanctions that were in place at the time. An amended executive order repealed the sanctions in 2017, though violations that occurred before then remain subject to enforcement.

Although Mashreq said in a statement the misconduct stopped in 2009, the consent order stated otherwise. From 2009 through 2014, the bank’s New York branch processed another 91 prohibited payments totaling approximately $2.5 million in value, according to the NYDFS.

The consent order further described how Mashreq carried out the alleged scheme, which involved instructing intermediary banks to move funds across correspondent banking networks to evade detection. Employees were instructed “to omit ‘any information (about Sudan) which could trigger [a] freeze as per U.S. laws pertaining to the subject,’” the NYDFS explained.

Further, bank procedures allegedly required employees to populate ‘Mashreqbank’ as the ordering institution in the relevant field of SWIFT (Society of Worldwide Interbank Financial Telecommunications) payment messages, instead of identifying the Sudanese ordering institution. “In addition, employees were to use ‘self’ as the ordering customer instead of the actual customer of the Sudanese institution,” according to the consent order.

On several occasions, the bank’s compliance and risk management department flagged the lack of identifying information as being in direct violation of the Bank Secrecy Act. In June 2002, for example, the bank’s heads of risk management, compliance, and audit had a meeting, in which they collectively “agreed that the current procedure to handle [Sudan-related payments] by MB head office is not compliant as it suppresses some fields.”

Despite raising these red flags, the bank did not make any changes to its operating procedures until several years later, the consent order stated.

Under the NYDFS settlement, in addition to the $100 million penalty, Mashreq must report on the “status and sustainability” of its compliance program to ensure compliance with U.S. sanctions administered by the Department of the Treasury’s Office of Foreign Assets Control (OFAC). The NYDFS acknowledged the bank’s substantial cooperation with the investigation and its ongoing remedial efforts.

The Department coordinated its probe with OFAC and the Federal Reserve Board, each of which has reached their own settlements with Mashreq. The Fed issued a consent cease-and-desist order against the bank but did not issue a fine. The OFAC settlement also does not include a fine.

However, the Federal Reserve settlement requires Mashreq to conduct on an annual basis “a review of OFAC compliance policies and procedures and their implementation for Mashreq’s global business lines, including, but not limited to, the branch and an appropriate risk-focused sampling of U.S. dollar payments.” The bank must also engage an independent third party to conduct a review of its OFAC policies and procedures.

“These settlements pertain to alleged conduct which involved USD transactions that primarily took place over a decade ago,” the bank stated. “Mashreq has since dedicated significant resources to strengthening its compliance policies and procedures to ensure it is conducting its business in accordance with all applicable laws and regulations in the regions in which Mashreq operates.”

Mashreq was fined $40 million by the NYDFS in 2018 for its failure to maintain effective and compliant anti-money laundering and OFAC programs.