OFAC Fines Two Wealth Management Companies for Sanctions Violations

CA Indosuez Switzerland S.A. (CAIS), an indirect subsidiary of Swiss-based Credit Agricole Corporate and Investment Bank (CAIB), was fined $720,258 for violating sanctions related to Ukraine and sanctions imposed against Cuba, Iran, Sudan and Syria. CFM Indosuez Wealth (CFM), an indirect subsidiary of Monaco-based Credit Agricole Corporate and Investment Bank (CACIB), was fined $401,039 for violating U.S. sanctions against Cuba, Iran and Syria.

Between April 2013 and April 2016, OFAC said CAIS operated U.S. dollar banking and securities accounts for 17 customers in sanctioned jurisdictions and conducted business on their behalf through the U.S financial system, including through U.S. correspondent banks and U.S. registered brokers. OFAC specifically said CAIS allowed customers in sanctioned jurisdictions to buy securities through U.S. companies even though CAIS collected know-your-customer data. In total, CAIS allowed 240 transactions worth more than $2 million, OFAC said, and 33 commercial transactions worth more than $1 million.

In the second settlement, OFAC said CFM operated U.S. dollar banking and securities accounts for 11 customers in Iran, Syria and Cuba for five years. Like CAIS, CFM collected know your customer (KYC) information on its customers but still allowed them to buy securities through U.S. companies from December 2011 through July 2016. In total, CFM processed 410 transactions worth about $966,000 and 16 commercial transactions worth about $267,000.

Although both CAIS and CFM were required to follow compliance policies “relayed” by their parent companies, the investment firms didn’t “fully implement” the procedures, OFAC said. “As a result,” OFAC said, “the customers who were ordinarily resident in sanctioned jurisdictions were able to continue to engage in securities and commercial transactions involving the U.S. financial system using their accounts at” the investment firms.

CAIS and CFM discovered the accounts during a “periodic oversight review” conducted by their compliance departments, OFAC said, which showed CAIS’s customers were residents in Iran, Syria, Sudan, Crimea and Cuba, and CFM’s customers were residents in Iran, Syria and Cuba. Even though both companies “implemented internal restrictions aimed at preventing certain payments” on those accounts, they later discovered that the restrictions didn’t prevent securities-related payments.

OFAC said the maximum civil monetary penalty for CAIS’s violations was more than $64 million, but decided to reduce the fine because it was a non-egregious case and because the violations were voluntarily disclosed. The agency also pointed to the fact that CAIS hadn’t received a penalty notice in the previous five years and took “extensive remedial measures” to improve its compliance procedures, including introducing a new “commercial screening tool.” OFAC also said the company “substantially” cooperated with OFAC’s investigation with well-organized responses to OFAC’s requests for information and agreed to toll the statute of limitations.

OFAC also pointed to several aggravating factors, including the fact that CAIS “had reason to know” it was dealing with sanctioned transactions. The agency said CAIS conferred more than $3 million in “economic benefit” to people in Cuba, Crimea, Iran, Sudan and Syria and caused “harm to the integrity of multiple sanctions programs.”

The maximum civil monetary penalty for CFM was more than $106 million, but OFAC reduced the fine because the case was non-egregious and the violations were voluntarily disclosed. Mitigating factors included CFM’s lack of a penalty notice in the previous five years, its substantial cooperation with OFAC’s investigation and its work to improve its compliance program.

Aggravating factors included the fact that CFM employees had reason to know they were processing illegal transactions, and the fact that the company conferred more than $1.2 million in “economic benefit” to people in Cuba, Iran and Syria, which harmed U.S. sanctions programs.

OFAC said both cases demonstrate the importance of foreign financial institutions maintaining “effective” sanctions compliance programs and procedures. The agency said companies that do business in multiple jurisdictions and “across a number of product lines” should ensure their controls are implemented “consistently” across their business.

Companies can also benefit from integrating KYC data into their sanctions screening platforms, OFAC said, and testing and auditing their controls. The agency added that “global subsidiaries, when instructed to implement a parent company’s compliance policies, should do so in a timely and effective manner.”

CAIS and CFM couldn’t be reached for comment.