The Treasury Department’s Office of Foreign Asset Control (“OFAC”) is a busy enforcement agency. OFAC has implemented the comprehensive Russia Sanctions Program in response to Russia’s invasion of the Ukraine. The scope and pace of this process has been unprecedented.
Along the way, OFAC is continuing a steady pace of sanctions enforcement actions. In a recent action, Banco Popular de Puerto Rico (“Banco Popular”), a Puerto Rican bank with branches in Puerto Rico and the Virgin Islands, resolved an enforcement action for $255,937 for processing 337 transactions for two individuals who were employed by the Venezuelan Government. The total value of the transactions was $853,126. All of the violations resulted from four personal accounts linked to two, lower level Venezuela Government employees.
On August 5, 2019, Executive Order 13884 was issued. EO 13884 block all transactions with the Venezuelan Government, which applied to “any person who has acted or purported to act directly or indirectly for or on behalf of” any “political subdivision, agency, or instrumentality” of the Venezuelan Government.
In response to EO 13884, Banco Popular adopted a plan to review all of its accounts that may fall within the scope of the prohibition. Unfortunately, for approximately 14 months, Banco Popular did not identify or block four personal accounts associated with two customers who worked for the Venezuelan Government.
One of the customers worked at a clerical position in the Venezuelan Government’s Diplomatic Representative Office, and the other customer was a customer service representative of Compañía Anónima Nacional Teléfonos de Venezuela (CANTV), a Venezuelan state-owned entity.
In November 2019, OFAC issued General License 34A, which authorized transactions for certain Venezuelan Government persons, but neither of these two individuals fell within the definition of a government employee. Banco Popular’s failure to identify for 14 months these two individuals as blocked persons results in the processing of 337 transactions involving $853,126.
In resolving this matter, OFAC noted the following aggravating factors: (1) Banco Popular had documentation indicating that two of its customers were low level employees of the Venezuelan Government but failed to identify them for 14 months; and (2) Banco Popular is a mid-sized bank with more than $61 billion in assets.
As mitigating factors, OFAC noted that Banco Popular (1) voluntarily disclosed the conduct; (2) implemented remedial measures to improve its sanctions compliance program, assigned additional resources to its sanctions compliance program and improved its sanctions alert and disposition procedures; (3) enhanced its sanctions training program; and (4) fully cooperated with OFAC during the investigation.
OFAC noted that it was important for financial institutions to conduct due diligence on their own direct customers (including, for example, their ownership structure to confirm that those customers are not blocked entities or individuals.