Most of this settlement is a single set of wire transfers. What makes it a detection case is the order of events: the bank was told, looked, confirmed, and still let the transfers go on.
The Cuba wires
JPMC processed 1,711 wire transfers totalling about $178.5 million between 12 December 2005 and 31 March 2006 involving Cuban persons. In November 2005 another US financial institution alerted JPMC that it might be processing wires involving a Cuban national through one of its correspondent accounts. JPMC investigated, and the results were reported to management and supervisory staff, “confirming” that transfers in which Cuba or a Cuban national had an interest were being made through the account.
Even so, the notice says, the bank failed to take adequate steps to prevent further transfers. It did not voluntarily self-disclose. The base penalty for this set was $111,215,000, by far the largest of the stated base penalties. The notice describes transfers running through a correspondent account, and locates the failure at the step where what the bank had learned had to be turned into action. It does not describe who held the account.
A trade loan and a late disclosure
On 22 December 2009 JPMC made a trade loan of about $2.9 million to the bank issuer of a letter of credit whose underlying transaction involved a vessel blocked because of its affiliation with Islamic Republic of Iran Shipping Lines. Managers decided in late December 2009 to self-disclose, but the disclosure was mailed only in March 2010, three days before the loan was repaid, and the bank was also slow to answer an OFAC subpoena on the matter. OFAC treated it as a voluntary self-disclosure. The base penalty was $2,941,838.
The subpoena response
On 13 October 2010 OFAC issued an administrative subpoena for documents on a wire transfer referencing “Khartoum”. JPMC compliance management failed to produce several responsive documents and repeatedly said there were no more. OFAC then supplied a list of documents it had reason to believe JPMC held, based on contact with a third-party financial institution, and JPMC produced more than 20 documents. The violation of the reporting regulations ran from 8 November 2010 to 1 March 2011; its base penalty was $250,000.
Smaller matters, not egregious
The settlement also covers nine wires between April 2006 and November 2008 totalling $609,308 that were not blocked or rejected, two letters of credit (one involving a blocked IRISL-linked vessel, one goods for Sudan), and a transfer on 24 May 2006 of 32,000 ounces of gold bullion, valued at about $20.56 million, for the benefit of a bank in Iran. Beyond the three programmes tagged on this page, the notice also cites the weapons-of-mass-destruction, global terrorism and former Liberian regime regulations.
The penalty
OFAC found the first three matters egregious because of reckless acts or omissions: JPMC is “a very large, commercially sophisticated financial institution”, and its managers and supervisors acted with knowledge of the conduct. The settlement is $88.3 million. OFAC mitigated for substantial cooperation (a historical transaction review requested by OFAC and tolling agreements), the absence of a penalty notice or finding of violation in the preceding five years, and the agreement to settle.
What the record shows
- Detection was not the failure. An external alert and an internal investigation both identified the Cuba transfers; the notice locates the failure afterwards.
- Cooperation with the regulator is also tested. One of the three egregious matters is the incomplete subpoena response, not a payment.
- One programme dominates. Cuba accounts for $111.2 million of the $114.4 million in base penalties the notice states for the three egregious matters.