Swiss banking giant UBS agreed to a $1.7 million settlement with The U.S. Treasury Department, Office of Foreign Assets Control (OFAC) on August 27, 2015 to resolve violations of U.S. sanctions. According to OFAC, the Swiss bank processed well over 200 prohibited transactions involving securities held for a single United States citizen who was targeted by an Executive Order for committing, threatening to commit, or supporting terrorism.
OFAC indicated that UBS “. . . acted with reckless disregard for U.S. sanctions requirements by failing to implement adequate controls to prevent the apparent violations from occurring despite receiving numerous warning signs that its conduct could lead to violations of U.S. sanctions laws,” The settlement was reached after UBS voluntarily revealed the lapse in its screening process.
This settlement follows a string of even larger sanctions penalties imposed by OFAC over the past year, including a $7.6 million settlement with PayPal, Inc., and a whopping $258.6 million settlement with Commerzbank AG. In both instances, OFAC determined that the institutions failed to employ adequate screening technology and procedures to identify the potential involvement of U.S. sanctions targets in processed transactions. PayPal’s disclosure, like UBS’ was voluntary. Conversely, OFAC determined that the sizable award against Commerzbank was justified, in part, by the fact that it did not voluntarily self-disclose the violations.
Although the year-to-date sanctions settlements are sizable, they still pale in comparison to the total $1.2 billion value of 2014 OFAC settlements. The recent rise of OFAC and the significant enforcement actions undertaken by this tiny but powerful federal agency underscores the importance of robust sanctions and AML scrubbing programs for financial institutions large and small. The disparate sizes of the settlements also highlight the importance of self-reporting in instances where lapses are uncovered.