Posted by Brian Monroe - email@example.com 11/09/2021
OFAC, Fed, NYDFS penalize Mashreq bank $100 million for sanctions failures, just three years after $40 million fine for similar issues
The largest and oldest bank in the United Arab Emirates will pay a host of federal and state regulatory and sanctions agencies $100 million for dealings with a blacklisted regime designated as a state sponsor of terror – just three years after paying $40 million for similar acrimonious actions and compliance inactions.
The U.S. Treasury’s Office of Foreign Assets Control (OFAC), Federal Reserve and the New York State Department of Financial Services (NYDFS) Tuesday issued coordinated and interlinked enforcement actions, orders and penalties against Dubai-based Mashreqbank for purposely omitting details on payment transactions with ties to Sudan.
The investigation by NYDFS uncovered that Mashreqbank “instructed its employees to avoid populating certain fields in the payment messages sent between banks so as to conceal the prohibited Sudanese element of these transactions.”
Such a move would effectively bypass the sanctions filters at other banks, evading the triggering of an alert or potential for intermediary institutions to freeze any of the transactions.
The country has been on U.S. blacklists since the 1990s for terror ties and human rights abuses.
The U.S., after reviewing the country’s progress in recent years and after Sudan satisfied several prerequisites to better stamp out extremist groups, removed the designation in December.
The case is eerily similar to other international bank “stripping” cases that have cropped up since 2009 – there have been nearly a dozen over a little more than a decade with forfeitures and penalties of more than $12 billion, including one case alone of more than $9 billion.
In those enforcement actions, senior executives, and in one instance even the compliance team itself, institutionalized the practice of scrubbing interbank payment messages in wires for links to countries on U.S. watchlists, including Iran, North Korea, Sudan, Cuba and others.
In the latest action, and a prior $40 million penalty against the bank by the Fed and NYDFS in 2018, regulators also highlighting a lack of culture, the importance of senior executive support and even a willingness to make examples out of staffers in and out of compliance – the dreaded specter of individual liability and a potential career killer.
The emphasis on compliance culture and individual liability, as well as the importance of empowered and informed AML and sanctions teams feeling they have the support and courage to speak up, should be a message banks large and small take to heart.
“While the details surfacing in this case may seem outlandish and alarming to compliance and investigative teams in most organization, with some likely even commenting ‘that could never happen in our organization,’ the reality is, it can and does,” said Jon Elvin, a former banking executive and Chief BSA/AML Officer, now the Executive Director of Strategy and Corporate Impact at ACFCS.
“The truth is, organizations, events, personalities and financial incentives can unduly shape behavior, broadly and in certain smaller sub-culture divisions,” he said, a nod to high-profile federal enforcement actions in recent years where pockets of non-compliant teams evaded program rules and brought the wrath of regulators.
This is why “corporate culture” is critical.
“Employees, especially those in risk management, compliance and investigative channels MUST know they have a responsibility and the support to do the right thing always,” Elvin said.
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