Romanian bank penalized over Iran and Syria sanctions lapses

First Bank processed 98 commercial transactions totaling approximately $3.6 million through U.S. banks on behalf of parties located in Iran and Syria, according to OFAC. In 2018, after JC Flowers became its majority owner, the bank processed Euro-denominated payments for persons located in Iran, the regulator continued.

First Bank voluntarily self-disclosed the apparent violations to OFAC after conducting a five-year lookback in March 2019. The review was prompted by a U.S. dollar transaction on a shipment to Syria flagged by the National Bank of Romania.

Compliance failure: “The Apparent Violations resulted from First Bank’s lack of understanding of the scope of U.S. sanctions regulations applicable to financial institutions without a physical presence in the United States,” OFAC stated. “In particular, the bank’s training and procedures for monitoring potential sanctions-related activity did not address the risk that First Bank could be indirectly exporting financial services through the U.S. financial system to sanctioned parties or comprehensively sanctioned jurisdictions noted in underlying trade finance and shipping documents, or processing transactions that did not transit the United States but were processed while majority owned by a U.S. person.”

Mitigating factors: OFAC deemed the case non-egregious. Additionally, the regulator stated, First Bank cooperated with the investigation by entering into a tolling agreement. The bank was further credited with undertaking the following compliance measures:

• Updating its sanctions screening tool;
• Terminating relationships with customers party to the subject transactions;
• Implementing enhanced diligence procedures to collect more information on the nature of transactions and potential for involvement with sanctioned jurisdictions, territories, or parties;
• Implementing enhanced policies and procedures to address the relevance and applicability of U.S. sanctions regulations to the processing of transactions that transit the U.S. financial system, as well as those payments processed by an entity owned by a U.S. person;
• More than doubling its compliance staffing overseeing sanctions and related issues;
• Conducting additional sanctions training with staff; and
• Issuing a new global sanctions policy.

The enhancements helped First Bank avoid a fine of $1.7 million.

OFAC stated the action “highlights the importance of (i) foreign financial institutions understanding the scope of U.S. sanctions regulations on transactions processed via the U.S. financial system or within the United States, and (ii) U.S. companies conducting sanctions-related due diligence both before and after acquisitions and to monitor newly acquired subsidiaries for OFAC compliance.”