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Violations of Iran and Syria Sanctions Programs results in OFAC fine for First Bank SA and JC Flowers & Co

31/08/2021

First Bank SA, located in Romania, and its U.S. parent company, JC Flowers & Co. (collectively, “Respondent”), have agreed to:

  • Remit $862,318 to settle potential civil liability for First Bank’s processing of transactions in apparent violation of OFAC’s Iran and Syria sanctions programs.

Specifically,

  • First Bank processed 98 commercial transactions totalling $3,589,189 through U.S. banks on behalf of parties located in Iran and Syria.

In 2018, after JC Flowers acquired a majority ownership interest in First Bank, First Bank processed Euro-denominated payments for persons located in Iran. The settlement amount reflects OFAC’s determination that the Respondent’s apparent violations were voluntarily self-disclosed and non-egregious.

In early 2019, First Bank’s regulator, the National Bank of Romania, flagged a U.S. dollar transaction that First Bank had processed for a shipment of timber from Romania to Syria. As a result, First Bank commenced a five-year lookback in March 2019, the results of which Respondent voluntarily self-disclosed to OFAC.

The apparent violations related to three categories of payments (“Apparent Violations”):

  1. Processing U.S. Dollar Payments for Individuals or Entities Located in Iran:
    • From March 2, 2016, to December 5, 2018, First Bank processed 34 outgoing payments totalling $991,246 through U.S. banks. The end-user of the underlying commercial transaction was in Iran, and the payments were made on behalf of Iranian customers of First Bank.
    • These transactions constituted the indirect exportation of financial services to Iran. They caused U.S. financial institutions to export financial services to Iran, in apparent violation of §§ 560.203 and 560.204 of the Iranian Transactions and Sanctions Regulations 31 CFR part 560 (ITSR).
  2. Processing U.S. Dollar Payments for Individuals or Entities Located in Syria:
    • From July 15, 2016, to December 6, 2018, First Bank processed 36 outgoing payments totalling $1,061,104 through U.S. banks in which the underlying trade finance documentation showed that the importers were located in Syria.
    • These transactions constituted the indirect exportation of financial services to Syria. They caused U.S. financial institutions to export financial services to Syria, in apparent violation of §§ 542.205 and 542.207 of the Syrian Sanctions Regulations, 31 CFR part 542 (SySR).
  3. Processing Euro-Denominated Payments to Iran as a Foreign Subsidiary of a U.S. Company:
    • In June 2018, JC Flowers acquired a majority ownership interest in First Bank, making First Bank an entity majority-owned by a United States person and thus subject to the prohibitions of § 560.215 of the ITSR.
    • Between October 17, 2018, and March 4, 2019, First Bank processed 28 Euro-denominated payments totalling $1,536,840 outside the U.S. financial system involving Iranian parties and interests. And there was no applicable authorization or exemption with actual knowledge or reason to know that the payments were for Iranian parties.
    • Accordingly, these transactions constituted apparent violations of § 560.215 of the ITSR.

Compliance Considerations

This action highlights the importance of:

  • Foreign financial institutions understanding the scope of U.S. sanctions regulations on transactions processed via the U.S. financial system or within the United States, and
  • S. companies conduct sanctions-related due diligence before and after acquisitions and monitor newly acquired subsidiaries for OFAC compliance.

Read more https://home.treasury.gov/system/files/126/20210827_firstbank_flowers.pdf

SANCTIONS