The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) recently issued two settlement agreements on consecutive days with non-U.S. financial institutions, which affirm the extensive reach of U.S. economic sanctions and underscore the government’s increased industry compliance expectations. On Aug. 26, OFAC reached a $2,329,991 settlement with Bank of China (UK) Limited, a financial institution located in London. On Aug. 27, OFAC reached an $862,318 settlement with First Bank SA, located in Romania, and its U.S. parent, JC Flowers & Co. The settlement agreements offer several important lessons for non-U.S. banks and non-U.S. companies conducting global transactions.
1. Transactions by non-U.S. persons can still be subject to OFAC sanctions. OFAC stated that from 2014 to 2016, Bank of China (UK) processed Sudan-related payments via U.S. correspondent banks. Its processing payments “through the U.S. financial system” constituted exporting financial services from the United States, in apparent violation of the Sudan sanctions, which in 2017 were repealed. Similarly, OFAC stated that from 2016 to 2018, First Bank processed payments for individuals and entities located in Iran and Syria through U.S. banks. Doing so constituted an indirect exportation of financial services and “caused U.S. financial institutions to export financial services” to Iran and Syria in apparent violation of the Iranian Transactions and Sanctions Regulations (ITSR) and Syrian Sanctions Regulations. OFAC emphasized the importance of non-U.S. financial institutions understanding the scope of U.S. sanctions on transactions processed via the U.S. financial system or within the United States.