African media is reporting that the Office of Foreign Assets Control (“OFAC”) and CBZ Bank are in the process of negotiating over a jaw-dropping proposed penalty. The penalty negotiations arise from CBZ’s allegedly having cleared U.S. dollar transactions for ZB Bank, a bank in Zimbabwe that appears on OFAC’s List of Specially Designated Nationals and Blocked Persons.
The charges by OFAC involve 15,127 violations, which led OFAC to write this in its initial penalty notice sent to CBZ in March:
Accordingly, the base penalty for the apparent violations equals the applicable schedule amount for each apparent violation, capped at US$250 000 per apparent violation, which in this case totals US$3,856,505,460.
The math here is a little whacked out for some reason since 15,127 times $250,000 is $3,781,750,000. But what’s several hundred thousand dollars, more or less, when you’re talking Dr. Evil sized billion dollar amounts? According to the press accounts, OFAC has already been bargained down to $385 million. Of course, that is still a good chunk of the banks current total assets of $2.1 billion.
The transactions involved were allegedly all denominated in U.S. dollars. Even so, the bank is trying to argue with OFAC that the transactions were “in-country” and therefore not subject to U.S. sanctions. It’s not quite clear whether this is an argument that only transactions by CBZ with SDNs not in Zimbabwe may be sanctioned, an argument not likely to get much traction. Or, alternatively whether this is an argument that no correspondent accounts in New York were used to clear the transactions, something that might have been possible for a few small transactions but not very likely for all 15,127 violations.
The better argument here, it seems, is that a $385 million dollar penalty against a bank with $2 billion in assets could cause a run on the bank and could harm ordinary people in Zimbabwe with accounts at the bank. That, of course, assumes that the U.S. government cares about ordinary people in Zimbabwe.
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