UBS AG (“UBS”)
On 27 August 2015, OFAC announced a $1,700,100 settlement with UBS relating to 222 apparent violations of the Global Terrorism Sanctions Regulations 31 C.F.R part 594. The violations relate to UBS’s alleged processing of 222 transactions related to securities held in the US for or on behalf of a UBS customer in Zurich, who had been designated by OFAC in October 2001 pursuant to Executive Order 13224, Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism (the “Client”).
Although UBS placed blocks and restrictions on the Client’s account to prevent the Client from withdrawing or transferring any funds or assets outside of the Bank, UBS continued to engage in investment-related activity on behalf of the Client, including processing USD securities-related transactions to or through the US, receiving dividends on US securities and capital calls, management fees, and cash distributions in connection with a US private equity investment. UBS maintained a global OFAC policy that required it to conduct screening on all outbound and inbound funds transfers. However, UBS considered these to be internal transfers since they did not involve external parties. The processing of the US securities transactions did not, therefore, generate any alerts.
OFAC considered that UBS had “acted with reckless disregard for US sanctions requirements for failing to implement adequate controls to prevent the apparent violations from occurring”. OFAC further stated that “this enforcement action highlights the importance of institutions taking appropriate measures to ensure compliance with all applicable sanctions [and] should also raise awareness regarding the sanctions obligations for foreign financial institutions – including those that purchase, sell transfer, or otherwise transact in US securities – that process transactions to or through the US”.
OFAC further determined that despite UBS having identified all of the apparent violations, they did not constitute voluntary self-disclosures because they were substantially similar to another apparent violation of which OFAC was already aware.
A copy of the enforcement notice can be found at http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20150827_33.aspx.