The sanctioned bank’s name was on the member list, in the fee calculations, on the exchange’s own website. What was missing was anyone who connected that name to a prohibition.
Inherited, not built
Nasdaq acquired OMX AB, a Swedish financial company, in 2008. OMX owned the Armenian Stock Exchange, renamed Nasdaq OMX Armenia. Among the exchange’s 35 member banks was Mellat Bank SB CJSC — the Armenian subsidiary of Iran’s state-owned Bank Mellat, which the US had designated under its weapons-of-mass-destruction proliferation sanctions back in 2007, before Nasdaq’s acquisition even closed.
Nasdaq OMX Armenia ran two markets its member banks were required to use: an overnight liquidity market for banks short of their daily reserve requirement, and a foreign-exchange trading platform. It matched orders, set the rules and billed members monthly — the actual funds moved through the Central Bank of Armenia as settlement agent, not through Nasdaq directly. Mellat Armenia used both markets throughout.
Flagged twice, understood neither time
On 9 October 2012, a new rule took effect making it unlawful for a foreign subsidiary of a US company to transact, even indirectly, with the Government of Iran or an Iran-connected person — exactly Nasdaq OMX Armenia’s position with Mellat Armenia. Nasdaq’s own global compliance policy already required staff to clear any dealings with Iran-connected parties through its Office of General Counsel.
Nasdaq had the information to apply both. A July 2012 risk-assessment questionnaire recorded that Mellat Armenia was an exchange member and that it was owned by Iran’s state-owned Bank Mellat; Nasdaq took no action. A second questionnaire in 2013 reached Nasdaq’s compliance and legal staff in the US; they did not connect it to the new rule either. Mellat Armenia’s access continued until September 2014, when Nasdaq finally identified the conflict and self-disclosed.
What this adds to the acquisition pattern
Unlike the technical blind spots in the C.H. Robinson and Key Holding cases, nobody here lacked access to the relevant fact. Two separate internal questionnaires surfaced Mellat Armenia’s ownership by name. The gap was downstream of that: a risk-assessment finding that reached compliance staff who, in OFAC’s words, did not “sufficiently understand the implications” of what they had just been told. See acquisition integration gaps.
OFAC’s own compliance notes make the connection explicit, citing its 2019 Framework directly: basic screening of the exchange’s 35 members as part of the acquired business’s due diligence would have surfaced Mellat Armenia’s ownership years earlier than a risk questionnaire eventually did.
The penalty
Non-egregious and voluntarily self-disclosed. OFAC credited Nasdaq’s full cooperation, including tolling the statute of limitations, and its remedial steps: divesting the Armenian exchange stake entirely, forming a dedicated sanctions working group, and rebuilding its screening and training programmes.
What the record shows
- A flagged fact still has to be understood, not just filed. The ownership information reached the right desks twice. Neither time did it connect to the rule that made it a problem.
- Divestment, not just integration, carries sanctions exposure. The gap here ran through a subsidiary Nasdaq eventually gave up entirely — acquiring a business and never fully folding it in left exposure on both ends of its ownership.