First Bank of Romania Settles OFAC Violations for $862,318 (Part IV of IV)
The First Bank of Romania and JC Flowers agreed to pay OFAC $862,318 to settle violations of Iran and Syria Sanctions Programs. First Bank is owned by its U.S. parent, JC Flowers & Company. In 2018, JC Flowers acquired a majority stake in First Bank, subjecting Frist Bank to OFAC sanctions.
In early 2019, First Bank’s regulator, the National Bank of Romania flagged a U.S. dollar transaction that First Bank processed for a shipment of timber from Romania to Syria. First Bank initiated a five-year look-back to deter if there had been any other prohibited transactions. Once concluded, First Bank voluntarily disclosed the conduct to OFAC and cooperated with the investigation.
During the period of March 2016 to December 2018, First Bank processed 34 outgoing payments through U.S. banks in which the end user of the transaction was located in Iran. The payments were made on behalf of Iranian customers of First Bank.
From July 2016 to December 2018, First Bank processed 36 outgoing payments through U.S. banks in which the underlying trade finance documentation revealed that the importers were located in Syria.
Between October 2018 and March 2019, First Bank processed 28 Euro payments involving Iranian parties and interests where First Bank knew or had reason to know the payments were for Iranian parties.
In sum, First Bank processed 98 transactions totaling $3.5 million through U.S. banks on behalf of individuals and entities located in Iran and Syria.
OFAC noted that First Bank misunderstood the application of U.S. sanctions to its operations outside the united States. OFAC specifically cited First Bank’s deficient training and procedures for monitoring transactions involving trade finance and shipping documents or processing of transactions. In particular, OFAC stated that First Bank lacked any understanding that its majority ownership by a U.S. company, JC Flowers, triggered application of sanctions to a broader range of financial activities.
According to OFAC, First Bank demonstrated a reckless disregard for U.S. sanctions regulations by failing to implement appropriate controls with respect to payments with a nexus to the U.S. financial system, and after 2018, payments involving a bank that was controlled by a U.S. entity. OFAC noted that First Bank knew or had reason to know it was processing payments for persons in Iran and Syria because the underlying documents referenced those countries.
To remediate its compliance deficiencies, First Bank: (i) updated its sanctions screening tool; (ii) terminated relationships with customers party to the subject transactions; and (iii) implemented enhanced diligence procedures to collect more information on the nature of transactions and potential for involvement with sanctioned jurisdictions, territories, or parties; (iv) implemented enhanced policies and procedures; (v) doubled its compliance staffing overseeing sanctions and related issues to provide more resources toward enhanced screening and monitoring; (vi) conducted additional sanctions training with staff; and (vii) issued a new global sanctions policy. OFAC emphasized the importance of companies conducting sanctions-related due diligence before and after acquisitions, and to monitor newly acquired subsidiaries for OFAC compliance.