The U.S. Department of the Treasury’s Office of Foreign Assets Control said Monday it fined Barclays Bank Plc $2.48 million to resolve potential civil liability for 159 apparent violations of the Zimbabwe sanctions regulations.
From July 2008 to September 2013, Barclays processed 159 banned transactions worth about $3.4 million through financial institutions in the United States, including Barclays’ New York branch.
The transactions were for corporate customers of Barclays Bank of Zimbabwe Limited that were owned 50 percent or more, directly or indirectly, by a company on OFAC’s List of Specially Designated Nationals and Blocked Persons.
This enforcement action highlights the importance for institutions with operations in countries with a significant presence of persons (individuals and entities) on the SDN List to take appropriate measures to ensure compliance with U.S. economic sanctions laws when processing transactions on behalf of their customers to, through, or within the United States.
London-based Barclays didn’t voluntarily self-disclose the apparent violations, OFAC said, but “the apparent violations [still constituted] a non-egregious case.”
Barclays faced a maximum penalty of about $5 million. OFAC reduced the penalty because of the bank’s cooperation.
OFAC’s Zimbabwe sanctions started in 2005 (31 C.F.R. Part 541). The sanctions block money transfers through the U.S. financial system by or for blocked organizations or people.
Beginning in 2006, Barclays UK operations began screening cross-border transactions involving Barclays Bank of Zimbabwe (BBZ) and its customers. Barclays UK relied on BBZ’s electronic customer records for sanctions-related screening.
BBZ’s electronic records system didn’t accurately capture or screen for beneficial ownership information for its corporate customers, OFAC said.
Barclays knew about the system’s shortcomings and tried to fix them in 2007 and again in 2009. The “work arounds” were too cumbersome and little used.
Barclays’ anti-money laundering policies required the bank’s operations — including BBZ — to identify the ultimate beneficial owners of corporate customers.
But, OFAC said,
BBZ’s Know Your Customer (KYC) procedures were ambiguous and difficult to follow with respect to the requirement to identify related parties and/or beneficial owners of corporate customers.
As a result, Barclays UK was “unaware of, and incapable of screening, this information for certain BBZ customers.”
In July 2008, OFAC designated Industrial Development Corporation of Zimbabwe (IDCZ) under the Zimbabwe sanctions. BBZ maintained U.S. dollar-denominated accounts for three corporate customers owned 50 percent or more directly or indirectly by IDCZ and were therefore “blocked persons.”
“Neither BBZ nor Barclays UK identified these customers as blocked persons at that time due to the aforementioned issues, however, and continued to process USD transactions for or on their behalf to or through the United State,” OFAC said.
Barclays serviced the blocked accounts until September 2013.
Multiple business lines and personnel within Barclays, including supervisory and management staff in the bank’s compliance and audit functions, had “actual knowledge or reason to know of the conduct.”
“Barclays failed to implement adequate controls to prevent the apparent violations from occurring despite numerous warning signs that its conduct could lead to a violation of U.S. sanctions laws,” OFAC said.
OFAC said Barclays “substantially cooperated” with the investigation by producing detailed and organized information and signing a statute of limitations tolling agreement.
OFAC’s February 8, 2016 Enforcement Information is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.