A small Puerto Rican bank was found to have violated U.S. sanctions against Venezuela by the Treasury Department’s Office of Foreign Assets Control (OFAC) for allowing three unlicensed transactions on a blocked account.
Nodus International Bank engaged in three transactions totaling $50,271 with blocked accounts controlled by a person added to OFAC’s List of Specially Designated Nationals and Blocked Persons in 2017, according to the agency’s enforcement release published Tuesday. The transactions were completed by Nodus without receiving a license from OFAC to deal in blocked accounts, as required. The bank’s sanctions compliance officer notified senior bank officials of this requirement, but the advice was not heeded, OFAC said.
Nodus’s violations were self-reported. OFAC determined the harm caused was not significant, and the bank implemented remediations because of the incident. As a result, the agency decided to issue a finding of violation but no fine.
“This action highlights the importance of financial institutions’ properly maintaining blocked property and records and filing accurate reporting to OFAC,” the enforcement release said. “Moreover, financial institutions should ensure that they receive all necessary licenses from OFAC before dealing in blocked property and clearly communicating OFAC requirements among an institution’s compliance and business lines.”
Compliance considerations: Nodus allowed funds from a security redemption to be deposited into a blocked account and processed an automatic debit from one of the blocked accounts to credit a blocked credit card with an outstanding balance, according to OFAC. Nodus then wrote off the balance on the credit card. All these transactions required a license from OFAC.
In addition to not applying for and receiving said license, Nodus allegedly failed to maintain relevant records associated with its handling of the blocked property.
This failure caused the bank’s 2018 annual report to OFAC to neglect to include one of the blocked accounts, which was later added to the 2019 report. Part of the problem, according to Nodus, was that its compliance officer had departed the bank, leaving it without access to all records and communications related to the bank’s handling of the blocked property.
Nodus remedial measures, according to OFAC, included “hir[ing] experts with experience in OFAC compliance to provide specialized training to all Nodus employees on OFAC sanctions,” as well as hiring an in-house lawyer in its compliance department “to assist with the handling of all sanctions-related matters.”
Nodus updated its current practice to freeze and restrict blocked accounts with a specific label that alerts employees such accounts are blocked for OFAC-related reasons and implemented a policy that bank employees “should contact the compliance department before taking any action with respect to the account,” according to the regulator.
Nodus implemented a change in user controls for its banking software to require the compliance department’s approval for any action involving a blocked account. The bank also updated its recordkeeping procedures related to blocked property.
Nodus did not respond to a request for comment.