Washington, D.C. (September 28, 2023) – On September 21, 2023, the Treasury Department announced that its Office of Foreign Assets Control ("OFAC") had reached a settlement with Emigrant Bank ("Emigrant"), a commercial bank located in New York, related to 30 apparent violations of the Iranian Transactions and Sanctions Regulations ("ITSR") for $31,868. The announcement stated that while the "statutory maximum civil monetary penalty in the matter is $9,928,410," the base civil monetary penalty in this case is $45,526. Because the apparent violations were non-egregious and were voluntarily self-disclosed by Emigrant, the final settlement amount was significantly reduced from even the minimum penalty.

In an earlier alert, we described how voluntary self-disclosure of a sanction violation can mitigate civil and criminal penalties. In this case, OFAC determined that "Emigrant acted without due caution or care in failing to implement controls to identify and prevent prohibited account services it provided to two Iranian residents, while knowing of their location in Iran." Other aggravating factors were that Emigrant was a sophisticated bank and that the violations occurred long after the ITSR were issued.

In reaching a settlement with Emigrant, OFAC considered the following mitigating factors:

  • OFAC had not issued any penalty to Emigrant in the five years preceding the earliest date of the transactions giving rise to the apparent violations;
  • Once Emigrant discovered the violations, it took appropriate remedial steps, including closing the accounts in question, updating its customer data system to avoid screening inaccurate countries of residence, searching for other potentially violative accounts, and screening the permanent address of each account;
  • Emigrant voluntarily self-disclosed the apparent violations and cooperated with OFAC in its investigation; and
  • All of the transactions in question resulted in negligible harm to U.S. sanctions policy objectives.

The ITSR do allow personal remittances to or from Iran, but only under certain conditions. In this case, however, the transfers were to other parties and that ran afoul of the regulations. This settlement emphasizes the importance of financial institutions instituting and maintaining effective compliance policies and procedures. While the sanctions in this case were those imposed against Iran, the same principles apply to the current and evolving sanctions related to the Ukraine-Russia conflict.

An important component of a sanctions compliance program should be a policy that guides an entity's next steps when it becomes aware of sanctions violations, in order to mitigate or eliminate potential civil claims or criminal charges to which it might be exposed. As is evident by the Emigrant settlement, it really does pay to resolve issues once they are discovered.

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