Last week, British Arab Commercial Bank (BACB), located in the United Kingdom, agreed to settle an OFAC enforcement action for $4 million.  (Here and Here).  BACB has no presence in the United States but was cited for processing 72 transactions in violation of the Sudanese Sanctions Regulations.

In reaching the settlement, OFAC reduced significantly the penalty amount of approximately $228 million under OFAC Enforcement Guidelines after consultations with BACB’s UK regulator, the Prudential Regulation Authority, and specific concern that the impact of such a penalty would be disproportionate and pose harm to BACB’s operating capabilities.  As a result, OFAC agreed to impose a $4 million penalty.

BACB did not voluntarily disclose the conduct.  To remediate the violations, BACB agreed to various compliance commitments. 

Between September 21, 2010, and August 27, 2014, BACK processed 72 bulk funding payments totaling approximately $190 million related to Sudan.  BACB operated US Dollar accounts on behalf of at least seven Sudanese financial institutions, including the Central Bank of Sudan.  BACB actively sought US Dollar business from Sudanese banks and processed these transactions via an internal book transfer process involving a nostro account maintained at a foreign bank (Bank A).  (A nostro account is a bank account maintained by one bank at another bank).  These transactions were not processed to, or through the U.S. financial system.  The process to fund the US Dollar nostro account at Bank B, however, did involve transactions processed to or through U.S. financial institutions in violation of U.S. economic sanctions.

BACB established a US Dollar nostro account with a non-U.S. financial institution in a country that imports Sudanese-origin oil to facilitate payments involving Sudan.  BACB funded the nostro account by routing large, periodic, USD-denominated wire transfers into the account.  The non-US financial institution in Europe then passed the USD-denominated transfers through banks in the United States for further credit to the US Dollar nostro at the non-U.S. financial institution.  BACB then instructed the institutions to process individual payments involving a variety of Sudanese parties, including Sudanese institutions.  Several BACB employees, including certain managers and a member of the compliance team, knew about the funding arrangement.

In reaching this settlement, OFAC cited BACB’s reckless disregard of OFAC Sudanese Regulations and its years-long pattern of conduct.  BACB ignored red flags that reasonably should have put the bank on notice that its conduct violated U.S. law.  Specifically, OFAC noted that several members of BACB’s senior management were aware of and involved in the conduct. 

OFAC also noted that BACB provided important investigative leads concerning the non-U.S. financial institution that maintained the nostro account.  BACB fully cooperatd with the OFAC investigation.

As part of its remediation effort, BACB exited the Sudanese market in 2014, hired new senior management, and implemented improvements to its compliance program by centralizing its compliance staff and updating its procedures governing KYC, AML and sanction.