A case about who is named on an account. A bank’s clients traded through the bank’s own omnibus accounts in the United States, so the US firms saw only the bank.
What happened
EFG’s subsidiaries bought and sold securities for foreign clients through omnibus accounts at US custodians and other US market participants. OFAC says trades and corporate actions in those accounts were generally made in EFG’s name, not its clients’, so the US firms “were unaware” that the transactions were for sanctioned persons.
- Cuba, 2014 to 2018. Subsidiaries in the Bahamas, Cayman Islands, Luxembourg, Monaco and Switzerland processed 727 transactions worth $29,939,701 for clients who lived in Cuba or whose beneficial owners were Cuban nationals. They included a Panamanian company owned by a person in Cuba and two investment firms in the British Virgin Islands and Panama with a Cuban ultimate owner. EFG Miami acted as broker on 404 of them.
- A designated individual. EFG Singapore had opened an account in 2009 for a Chinese national OFAC designated as a narcotics kingpin in 2014. The bank froze the account internally but for more than four years did not tell its US custodian, so 141 transactions, mostly interest and dividends, worth $468,615 went through.
- A designated Russian client, 2023. After a client of the Swiss subsidiary was designated, EFG notified the custodians, but missed three positions the client had pledged to EFG in a securities-lending agreement, which were held in EFG’s name. Five dividend payments worth about $1,200 followed.
The penalty
Voluntarily self-disclosed and non-egregious, so the base was half the transaction value, $10,686,977. The settlement was $3,740,442, with $1,000,000 of it suspended pending compliance commitments. OFAC says EFG froze the accounts internally so the clients could not benefit, and credited remedial steps including written notices to US custodians for all designated clients, high-risk-country controls and annual sanctions risk assessments.
What the record shows
- An omnibus account hides the client from the US firm. The bank’s own controls were the only place the sanctions status was known.
- The Cuban clients were held through companies. Some beneficial owners sat behind Panamanian and British Virgin Islands entities.