TD Bank, N.A. agreed to pay approximately $105,000 as part of a settlement with the U.S. Treasury’s Office of Foreign Assets Control (OFAC) for “multiple sanctions compliance breakdowns” that contributed to more than 1,000 apparent violations of North Korean sanctions regulations.
The bank was further fined approximately $10,000 for 145 apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations, OFAC announced Dec. 23. The agency said the total settlement amount of approximately $115,000 reflected its determination the apparent violations in both matters were voluntarily self-disclosed and non-egregious.
Additionally, “No [bank] managers or supervisors appear to have had actual knowledge” regarding the conduct that led to the apparent violations in both matters, OFAC stated in its web notice.
North Korea sanctions violations
Between December 2016 and August 2018, TD Bank “processed 1,479 transactions totaling $382,685.38 and maintained nine accounts on behalf of five employees of the North Korean mission to the United Nations without a license from OFAC,” the regulator stated.
North Korean passports presented to TD Bank at account opening did not generate an alert during the customer screening process because the bank “relied heavily on a vendor-supplied politically exposed persons (PEP) list, which did not include government employees of sanctioned countries,” according to OFAC.
Additionally, bank employees “often misidentified North Korea (referring to it as Korea or South Korea or using a country code meant for South Korea) or left the citizenship field blank in the customer profiles,” OFAC stated. As a result, the bank’s screening system did not flag any of the accounts.
Among mitigating factors in assessing the fine total, OFAC noted TD Bank enhanced its controls for identifying government officials of sanctioned countries and updated its related operating procedures.
“[T]he North Korea-related matter emphasizes that banks and other financial institutions should consider taking steps to ensure accurate recordkeeping, including the correct identification of nationality, especially when providing financial services in connection with diplomatic accounts,” OFAC stated. “Banks and other financial institutions should also consider implementing appropriate controls to flag highly relevant information in customer profiles that may indicate a sanctions nexus, such as accountholder passports issued by a sanctioned jurisdiction.”
Foreign Narcotics Kingpin sanctions violations
TD Bank maintained two accounts for more than four years for a U.S. resident who was listed on OFAC’s list of specially designated nationals (SDNs). OFAC stated the failure to correctly identify this individual as a person on the SDN list was the “result of human error and a breakdown in [the bank’s] sanctions compliance procedures.”
According to OFAC, the name of the U.S. resident appeared in the bank’s systems as “Esperanza Maradiaga Lopez,” while the SDN list had the name as “Esperanza Caridad Maradiaga Lopez.” Lopez’s date of birth that TD Bank had on file matched the date of birth in the SDN listing.
Although the bank’s compliance program flagged the account for a possible SDN list match, bank analysts made an incorrect evaluation “multiple times.” This conduct violated TD Bank’s compliance policies, “which require alerts to be escalated if a match occurs in first and last name and any additional information field,” OFAC stated.
“This action demonstrates the necessity of not merely developing appropriate procedures and policies for adjudicating and escalating sanctions screening alerts, but also ensuring that they are followed and implemented accordingly,” said OFAC. “This action also highlights the need for proper coordination of compliance efforts and actions across various departments and business units within a financial institution, such that a decision to block an account by one department cannot be overturned by another without appropriate controls.”
OFAC further highlighted “the importance of developing and implementing appropriate sanctions screening controls, following internal escalation procedures, and providing comprehensive training to relevant employees” regarding both matters at TD Bank.
In a response statement, TD Bank said, “We believe the settlement is a fair resolution of these matters. In both cases, TD Bank self-identified and remediated technical issues and mistakes that were limited in scope, and we voluntarily reported the transactions to the Office of Foreign Assets Control in a timely manner. At TD Bank, we have stringent processes and procedures in place that reflect our strong and unwavering commitment to U.S. sanctions compliance.”