Comments on: Australian Bank Agrees to Pay $5.75 Million to OFAC

By: Hillbilly

Hillbilly — Mon, 31 Aug 2009 19:54:02 +0000

Fines collected by these agencies are remitted to the General Treasury. If the agencies got to keep them them, DDTC could finance itself without imposing an unconstitutional export tax disguised as a registration fee.

By: Chris W.

Chris W. — Fri, 28 Aug 2009 15:56:35 +0000

Does anyone know what happens to the money that OFAC/DDTC/BIS collect through fines? It seems there is a good amount of money involved & I’m wondering if we know where it goes?

Thanks!

By: Clif Burns

Clif Burns — Thu, 27 Aug 2009 16:49:09 +0000

Jim, your calculation is more accurate than mine because the Cuban penalties are indeed calculated under TWEA, not IEEPA. I’ve updated the post and credited you.

By: Jim Slear

Jim Slear — Thu, 27 Aug 2009 15:21:24 +0000

I believe the maximum calculation here should be closer to $57.04 million because the Cuba violations are TWEA-based, which carry a maximum civil fine of $65,000 and no transaction value plus-up.

Assuming the violations were deemed egregious (which seems so based on the penalty) under OFAC’s guidelines, the maximum civil fines would be $56 million for the Sudan violations(possibly higher if some transactions were valued at less than $250,000) plus $1,040,000 (16 X $65,000) for the Cuba violations.

If I am correct, this means the mitigation is on par with that given to National Australia Bank (i.e., almost 90 percent), but the penalty was many times higher because of the new transaction-based penalties under IEEPA for the Sudan violations.

By: Hillbilly

Hillbilly — Thu, 27 Aug 2009 11:33:53 +0000

There is a serious question as to whether imposition of the higher penalties on acts that took place prior to enactment is constitutional. The legislative history makes clear that these “enhanced” penalties are punitive, not remedial. Perhaps the Aussies at A N Zed just have more fortitude in facing off with OFAC.

By: Kelly Yip

Kelly Yip — Thu, 27 Aug 2009 02:45:01 +0000

OFAC’s decision to mitigate the penalty and not fining ANZ over $100 million (twice the amount of each economic sanctions violation [transaction] under the International Emergency Economic Powers Enhancement Act) was that ANZ cooperate and took prompt remedial response by upgrading their detection systems in addition to implementing new policies and procedures.

Another reason given was that in the years preceding the transactions, ANZ had not been subject to an OFAC enforcement action. With regard to the latter, it could very well be because they were never caught. With the former, it’s not like ANZ had any choice but to cooperate. They had to clean up their act.

Rather ironic that one of the remedial action ANZ is enacting is the implementation of an enhanced filtering system to detect transactions that might violate US sanctions. The Sudanese wires were deliberately effected, not because of system failure nor were they inadvertent transactions. OFAC’s decision is contrary to the International Emergency Economic Powers Enhancement Act.

There are some who believe the low fine is related to the depressed economy and that OFAC didn’t want to wipe out ANZ with a huge fine. My response? Duh? Didn’t ANZ cough up $550 million to acquire the RBS’ Asian banking operations last year?

Seriously speaking, I have spoken to some very senior and respected banking compliance officers who have been in the industry for over 40 years and they feel ANZ got a sweetheart deal. Given the same kind of circumstances, I rather doubt other financial institutions would have –or will–make out as well as ANZ.

Regards,
Kelly Yip

By: MJ

MJ — Thu, 27 Aug 2009 01:55:57 +0000

Clif,

OFAC’s announcement states:

“Although ANZ did not voluntarily self-disclose the apparent violations of the Sudanese Sanctions Regulations, ANZ substantially cooperated with OFAC by conducting an extensive review of transactions. This review identified additional apparent violations of the Sudanese Sanctions Regulations of which OFAC was not aware, as well as apparent violations of the Cuban Assets Control Regulations, which ANZ voluntarily self-disclosed to OFAC.”

I read this to mean that OFAC discovered at least one potential violation of the Sudanese Sanctions Regulations and ANZ was notified. ANZ launched an internal investigation and discovered and voluntarily reported to OFAC additional apparent violations of the Sudanese Sanctions Regulations as well as apparent violations of the Cuban Assets Control Regulations.

What I wonder about are the other 11 deals implicating 11 other countries. Would it be common practice for OFAC to settle these other allegations with ANZ privately and without penalty?