Nasdaq agreed to pay more than $4 million as part of a settlement with the Treasury Department’s Office of Foreign Assets Control (OFAC) addressing apparent Iran sanctions violations at the stock exchange operator’s former Armenian subsidiary.
Nasdaq OMX Armenia, the former owner and operator of the Armenian Stock Exchange (ASE), was found by OFAC to have committed 151 apparent violations of U.S. sanctions on Iran by allowing the designated Armenian subsidiary of Iran’s state-owned Bank Mellat access to its platform, according to the agency’s enforcement release published Friday.
Nasdaq voluntarily self-disclosed the matter, which OFAC deemed “non-egregious.”
The details: Mellat Armenia, which was initially designated in 2007, regularly participated in credit resource and foreign exchange markets operated and overseen by Nasdaq OMX Armenia, which continued the functions of the ASE following Nasdaq’s 2008 acquisition of OMX, OFAC said.
Effective December 2012, Nasdaq OMX Armenia became prohibited from providing services to Iran or the government of Iran under new sanctions restrictions at the time.
Yet, the company continued to list Mellat Armenia as a market participant as part of its services provided to the Armenian banking sector until September 2014, according to OFAC. During this period, “It appears neither Nasdaq OMX Armenia nor Nasdaq properly understood the sanctions implications of Mellat Armenia’s participation on the platforms that Nasdaq OMX Armenia owned and operated,” the agency said.
A July 2012 risk assessment questionnaire that noted Mellat Armenia was a participant on the ASE and the subsidiary of an Iranian state-owned entity prompted no action, neither did a 2013 questionnaire identifying Mellat Armenia as a market participant that was submitted to Nasdaq compliance and legal personnel in the United States, OFAC stated.
Compliance considerations: In 2014, Nasdaq submitted an initial notice of voluntary self-disclosure to OFAC. It subsequently wound down its ownership interest in the ASE and sold off Nasdaq OMX Armenia in 2018, though it was still liable because the former subsidiary’s alleged activities would have been prohibited for U.S. persons, OFAC noted.
OFAC calculated the base penalty in the case to be approximately $16 million. It was reduced because of factors including:
- Nasdaq’s full cooperation with the agency’s investigation, including its disclosure and tolling of the statute of limitations;
- Its eligibility for a license to permit the ASE’s continued engagement in certain activities with Mellat Armenia; and
- Its remedial measures, including creating a sanctions working group, implementing new training, enhancing screening software, and conducting assessments of its compliance programs.
In its release, OFAC noted the complexities of sanctions risks in international mergers and acquisitions and that, regardless, a well-designed and -implemented compliance program should allow U.S. persons to remediate deficiencies in a timely manner.
Company response: “Nasdaq is pleased to resolve this matter,” said a firm spokesperson in an emailed statement. “… Nasdaq maintains a robust compliance program and is committed to adhering to the highest levels of ethics and integrity.”