The Office of Foreign Assets Control (“OFAC”) whacked UBS AG, a Swiss bank, with a $1,700,100 penalty today. (That extra $100 is there to prove that OFAC reached this penalty in a super-accurate and completely scientific fashion.) The fine arises from UBS processing 222 transactions of unidentified value for an individual whose name was kept secret by the bank from OFAC but who was apparently designated as a global terrorist on OFAC’s Specially Designated Nationals and Blocked Persons List (the “SDN List”).
Although everyone understands why the Santa in Secret Santa is a secret, it may not be immediately clear why the SDN in a Secret SDN is clear. Apparently, Swiss law protects the names of global terrorists as well as those of ordinary customers. In other words, Switzerland is more interested in protecting the revenue of its banks than the safety of everyone else in the world. Frankly, if OFAC stood up to this nonsense and said it would fine UBS the maximum penalty (at least $250,000 times 222 violations which comes to $55.5 million) if it didn’t cough up the name of the SDN in question, well, even I might have said that was justified.
There’s another oddity in the OFAC release explaining the penalty. Obviously since the case was all about a secret SDN, the only way that OFAC could have learned about it without annoying the Swiss government is through a voluntary disclosure by UBS.
OFAC has determined that although UBS identified all of the apparent violations, the disclosures are not voluntary self-disclosures within the scope of OFAC’s definition under the Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A, because they were substantially similar to another apparent violation of which OFAC was already aware.
It’s rather difficult to get any idea what this means in the context that OFAC has no idea as to the identity of the SDN involved. So what does substantially similar mean? That OFAC had knowledge that UBS was supporting another SDN? Or does it mean that OFAC was aware that UBS had processed blocked funds for the Cuban government? Apparently, OFAC is saying that if it knows that you ever violated any OFAC rule you have no right to voluntarily disclose a separate and unrelated violation of that or a similar rule.
Still, between the Swiss and OFAC in this situation, I’m voting for OFAC.