JP Morgan Chase Bank Settles “Old” Sanctions Case for $5 Million
The Treasury Department’s Office of Foreign Asset Control (“OFAC”) announced its third enforcement action for 2018. While OFAC has been busy with implementing new sanctions regimes and re-imposing the Iran sanctions regime, OFAC is beginning to clear some of the enforcement matters that have been pending.
JP Morgan Chase agreed to a $5.2 million settlement with OFAC for 87 apparent violations from the processing of net settlement payments totaling just over $1 billion, of which 0.14 percent involved sanctioned parties. Specifically, JP Morgan Chase processed 87 transactions in violation of the Cuba, Iran, and Weapons of Mass Destruction Sanctions Programs.
JPMorgan Chase voluntarily disclosed the apparent violations, and OFAC determined that the violations were non-egregious, resulting in a base penalty of nearly $8 million, which was then reduced to $5.2 million because of Chase’s voluntary disclosure, cooperation and remediation.
JP Morgan Chase’s conduct surrounded transactions with state-owned airlines that were prohibited under the Cuba, Iran and WMD Sanctions Programs. JP Morgan Chase operated a net settlement mechanism to resolve billings among the various airlines and other market participants on behalf of its client and its approximately 100 members and a non-U.S. entity and its over 350 members. Eight of the participating airlines were sanctioned parties or located in countries that were sanctioned.
JP Morgan Chase’s violations occurred because of it failed to screen participating entities in the non-U.S. entity which included sanctioned parties. JP Morgan Chase had the information needed to conduct the screening. JP Morgan Chase also ignored several red flag notices and other warning signs, including two specific warnings that OFAC-sanctioned entities were participating in the settlement process.
On the mitigating side, OFAC observed that no JP Morgan Chase managers or supervisors were aware of the conduct or transactions; the total harm to OFAC’s sanctions program was significantly less than the value of the transactions.
JP Morgan Chase implemented compliance program improvements. Specifically, JP Morgan Chase screened all of its transactions between February 2012 and the termination of its relationship with its U.S. entity client. JP Morgan Chase also increased its compliance staff, implemented new sanctions-screening software, and enhanced its training program.
In a separate and related action, OFAC issued a Finding of Violation against JP Morgan Chase for violations of the Narcotics Kingpin Sanctions Regulations and the Syrian Sanctions Regulations. OFAC imposed no penalty for this violation.
Over a three-year period between 2011 and 2014, JP Morgan Chase processed 85 transactions totaling approximately $46,000 and maintained eight accounts on behalf of six customers were who were on the SDN List.
OFAC noted that, from 2007 to October 2013, JP Morgan Chase used a vendor screening system that failed to identify these six customers as potential matches to the SDN List. Specifically, OFAC noted the system failed to identify customer names with hyphens, initials, or additional middle or last names as potential matches to similar or identical names on the SDN List. Despite strong similarities between the accountholder’s names, addresses, and dates of birth in the account documentation and on the SDN List, JP Morgan Chase maintained accounts for, and/or processed transactions on behalf of, these six customers.