By Brian Monroe
February 11, 2016
The US Treasury’s Office of Foreign Assets Control levied a $2.5 million penalty against United Kingdom-based Barclays Plc for processing nearly 160 transactions tied to sanctioned entities in Zimbabwe, according to a penalty notice released this week.
From July 2008 to September 2013, Barclays processed 159 transactions totaling approximately $3.4 million touching financial institutions located in the United States – including Barclays’ New York branch (Barclays NY) – for or on behalf of corporate customers of Barclays Bank of Zimbabwe (BBZ) Limited that were owned 50 percent or more by a blacklisted group.
The penalty is significantly smaller than other headline-grabbing sanctions violations penalties in recent years.
Those penalties have surged to as high as nearly $9 billion. Barclays also has previously run afoul of US authorities, tied to its sanctions program, paying nearly $300 million in 2010. Ironically, OFAC cited as a “mitigating factor,” the bank hasn’t had a violation in the prior five-year period, a narrow escape.
OFAC found the following to be aggravating factors in this case:
- Although Barclays attempted to comply with OFAC sanctions despite various constraints imposed by the local Zimbabwean authorities, Barclays failed to implement adequate controls to prevent the apparent violations from occurring despite numerous warning signs.
- Multiple business lines and personnel within Barclays, including supervisory and management staff in the bank’s Compliance and Audit functions, had actual knowledge of the conduct, including awareness of the systems limitations used by BBZ with respect to capturing full information concerning the beneficial ownership of certain of its corporate customers.
- Barclays processed 159 funds transfers totaling approximately $3,375,617 that conferred economic benefit to, and provided access to the U.S. financial system, for blocked persons.
- Barclays is a large and commercially sophisticated international financial institution.
- Barclays’ compliance program was inadequate to identify BBZ’s customers as blocked persons and/or prevent the apparent violations from occurring.
Conversely, OFAC considered the following to be mitigating factors:
- Barclays has not received a penalty notice or Finding of Violation in the five years preceding the earliest date of the transactions giving rise to the apparent violations.
- Barclays took remedial action in response to the apparent violations.
- Barclays substantially cooperated with OFAC’s investigation by submitting detailed and organized information, and by executing a statute of limitations tolling agreement and an extension to the agreement.
Sanctions enforcement snapshot: Latest Barclays penalty small potatoes, not so for others
In June 2014, BNP Paribas Bank (BNPP) pleaded guilty in New York County to falsifying business records and conspiring to evade U.S. sanctions and paid a record $8.83 billion in criminal forfeiture and penalties.
Since 2009, nearly a dozen banks, including BNPP and CACIB, have forfeited approximately $12 billion for their illegal conduct, with half of the funds being paid to the City and State of New York.
The Manhattan District Attorney’s Office previously has entered into Deferred Prosecution Agreements with the following financial institutions related to U.S. sanctions violations:
- Commerzbank AG for $342 million in 2015
- HSBC Bank for $375 million in 2012
- Standard Chartered Bank for $327 million in 2012
- ING Bank for $619 million in 2012
- Barclays Bank for $298 million in 2010
- Credit Suisse AG for $536 million in 2009
- Lloyds TSB Bank for $350 million in 2009
As for Barclays this time around, OFAC also considered the fact that the prohibited entities were not publicly identified or designated and included on the SDN List at the time that Barclays processed transactions for or on their behalf.
OFAC determined that Barclays did not voluntarily self-disclose the apparent violations to OFAC, and that the apparent violations constitute a non-egregious case. The total base penalty amount for the apparent violations was just more than $5 million.