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Dubai Bank Pays $100 Million to Resolve Sanctions Violations with DFS, OFAC and Federal Reserve

Mashreqbank, based in Dubai, agreed to pay $100 million to the New York Department of Financial Services, the Federal Reserve, and the Office of Foreign Asset Control for violation of the now-repealed Sudan Sanctions Regulations.  The Sudan Sanctions Regulations were repealed on June 29, 2018.

OFAC issued only a Finding of Violation, rather than impose a civil penalty, in light of Mashreqbank’s willingness to agree to a retroactive statute of limitation waiver agreement, and Mashreqbank’s agreement to pay a $100 million fine to the NY DFS and Federal Reserve.

The NY DFS imposed a $100 million penalty against Mashreqbank. The Federal Reserve imposed a cease and desist order because Mashreqbank had insufficient policies and procedures to comply with U.S. sanctions laws.

Between 2005 and 2009, Mashreqbank’s London branch processed 1760 U.S. dollar payments for Sudanese banks and intentionally disguised information from U.S. banks that would have identified the payments as illegal.  Mashreqbank did this by directing its employees to avoid “populating certain fields in the payment messages” in order to conceal the connections to Sudan banks.  Specifically, Mashreqbank employees failed to populate field 52 (originating institution) and omitted the true originating bank in field 58 (beneficiary bank) in the SWIFT MT202.

As a result, the U.S. correspondent banks processed the transactions because the payment messages did not disclose the fact that the originating banks involved in the transactions were based in Sudan.  The U.S.-based correspondent banks acted under the mistaken belief that the transactions did not originate from Sudan. Mashreqbank processed more than $4 billion in illegal payments over the four-year period using this technique to disguise the illegal payments.

The NY DFS entered into a Consent Order with Mashreqbank, and cited the fact that an additional $2.5 million in illegal transactions were processed between 2010 to 2014 but that these transactions were “less obviously” Sudan-related payments.

Mashreqbank is the oldest UAE privately-owned bank and maintains a branch in New York City.  In 2018, the NY DFS entered into a consent order with the bank that imposed a $40 million fine against the bank for anti-money laundering violations.

OFAC concluded that Mashreqbak acted in reckless disregard of OFAC’s Sudan sanctions program because it did not identify the involvement of U.S. banks in the transactions.  OFAC noted that several senior executives at the bank were aware of the ongoing violations.

In deciding not to impose a civil penalty, OFAC cited several significant mitigating factors, including Mashreqbank’s agreement to toll the statute of limitations and extend the agreement several times and its full cooperation throughout the investigation.  OFAC also cited the fact that Mashreqbak ceased the activity before OFAC initiated the investigation in 2015.

To remediate the prior violations, Mashreqbank increased its compliance staff by more than 400 percent since 2007, closed all U.S. dollar accounts of Sudanese banks in 2009, and implemented new procedures to ensure that all payment messages were completed with accurate bank and customer information.  The bank also implemented an automated screening program for review of customer names, conducted an OFAC risk assessments and implemented enhanced vendor screening tools.  Mashreqbank estimated that it spent over $122 million to improve its compliance program over the last four years, including additional staff, new software, and enhanced training programs. Mashreqbank represented that it intends to spend an additional $40 million on compliance improvements and enhancements.

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