UK Bank Fined $2.3 Million for Violations of Now-Repealed Sudan Sanctions Program

Aug. 31, 2021

    On August 26, 2021, the Office of Foreign Assets Control (OFAC) announced it had reached a settlement agreement with the London based Bank of China (UK) Limited (BOC UK) stemming from a series of self-reported violations of the Sudan Sanctions Regulations. Under the agreement BOK UK agreed to pay $2,329,991 after it disclosed it had processed financial transactions in violation of OFAC’s now-repealed Sudan sanctions program.

    According to the published enforcement notice, an internal BOC UK review ultimately led to the discovery of the aforementioned violations, with the review initially being triggered after a Sudanese customer requested that BOC UK process a payment. A deeper review of BOC UK records revelated that between September 4, 2014, and February 24, 2016, BOC UK exported financial services from the US when it processed $40,599,184 in transactions through the US financial system on behalf of parties in Sudan. In total 111 commercial transactions were identified in violation of the regulations. While pursuant to Executive Order 13761 (as amended by Executive Order 13804) the export of financial services to Sudan has not been broadly prohibited by OFAC since October 12, 2017, the transactions in question occurred prior to this date, at a time when the regulations did prohibit the exportation, directly or indirectly, to Sudan of any goods, technology, or services from the US.

    In reaching its decision to impose a penalty of $2,329,991 OFAC determined that several aggravating factors were present in this instance. According to OFAC, BOC UK “demonstrated a reckless disregard for US sanctions requirements” when it processed transactions through the US financial system for entities located in Sudan. BOC UK reportedly had both account and transactional information indicating a Sudanese connection. OFAC additionally found that BOC UK conferred economic benefit from the roughly $40.6 million in transactions, all while being a “commercially sophisticated financial institution” with experience processing international transactions.

    While aggravating factors were present, several mitigating factors worked in BOC UK’s favor. OFAC stated that BOC UK had no prior sanctions history, it self-identified all violations, it cooperated with OFAC’s subsequent investigation into the matter, and it entered into a statute of limitations tolling agreement with OFAC. Additionally, OFAC stated that BOC UK has undertaken several remedial measures since the identification of these violations, including the establishment of an executive level committee responsible for the implementation of compliance policies and procedures and has since promised to conduct annual enterprise-wide sanctions risk assessments. BOC UK has also now agreed to implement a “centralized customer due diligence function” and to refine firm-wide staff training related to sanctions compliance.

    This enforcement action serves as an important reminder that OFAC both can and will pursue enforcement actions for past violations occurring prior to the lifting of sanctions. In the enforcement notice OFAC stated, “the revocation of these [Sudan] sanctions does not affect past, present, or future OFAC enforcement investigations or actions related to any apparent violations of the SSR arising from activities that occurred prior to October 12, 2017.”

    If you have additional questions about OFAC compliance please do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.