The Office of Foreign Assets Control (“OFAC”) announced yesterday that Barclays Bank agreed to cough up $2,485,890 to settle charges that it dealt with parties blocked under the Zimbabwe sanctions. At issue were three parties that were not themselves on the SDN List but which “were owned, 50 percent or more, directly or indirectly, by” the Industrial Development Corporation of Zimbabwe (“IDCZ”). Because IDCZ was put on the SDN List in 2008, the three parties at issue were blocked under OFAC’s 50 percent guidance.
The OFAC announcement offers a confusing description of how and why Barclays did not determine that the entities at issue were owned by blocked parties and were therefore themselves blocked. The story, such as it is, starts with OFAC noting that “local restrictions precluded Barclays from implementing measures for complying with economic sanctions, including sanctions screening, in Zimbabwe.” Because Barclays in Zimbabwe was legally forbidden to screen customers, Barclays did the screening in London, using electronic information which the Zimbabwe Barclays maintained but which, for some reason, did not include information beyond the name of the customer. As a result, Barclay’s processed transactions for the three IDCZ-owned customers from 2008, when IDCZ was added to the SDN List, until 2012, when a U.S. financial institution in the chain of the transactions blocked four transfers involving one of the three blocked entities. Even after Barclays NY conducted an investigation and determined that the customer was blocked as a result of the 50 percent rule, Barclays in London failed to upload that information into its screening filter until after four more transactions involving that customer had been processed.
It seems clear that Zimbabwe’s blocking laws played more than a casual role in the inability of Barclays to determine that the customers at issue were blocked due to the ownership interest of IDCZ. This is the first I’ve heard of Zimbabwe apparently making it illegal to screen parties against the U.S. list but, not surprisingly, OFAC is not going to be bothered with local laws (as we’ve seen before). OFAC does say that these local laws make it a non-egregious case but that, of course, did not mean that Barclays would escape getting its knuckles thwacked for $2.5 million by the agency. Apparently OFAC believes that the road to hell is paved with non-egregious actions.