The dollars never moved for the sanctioned party. They moved next to it, in matching amounts, on the same days.
The structure
UBAF finances trade between Europe and the Middle East, North Africa, sub-Saharan Africa and Asia. From August 2011 to April 2013 it kept dollar accounts for sanctioned Syrian financial institutions and, through those, did dollar business that reached the US financial system indirectly. Of 127 apparent violations, 114 were internal transfers for Syrian entities totalling about $1.3 billion, each followed by a corresponding payment through a US bank.
- 45 transfers between clients. UBAF moved dollars between a sanctioned Syrian client and a non-sanctioned one on its own books, then paid dollars for the non-sanctioned client through a US bank, with dates and amounts that closely matched the internal transfer.
- 69 foreign-exchange trades. UBAF debited one currency and credited another for a sanctioned Syrian customer on its books, then ran a US-cleared FX trade for a third party that closely matched it.
- 13 trade-finance transactions. These included back-to-back letters of credit: the Syrian party’s own credit involved no dollar clearing, but the intermediary entered or received a corresponding dollar letter of credit to buy or sell the same goods. UBAF also issued or confirmed dollar letters of credit for sanctioned parties and paid them through a US-cleared transaction.
The belief behind it
UBAF knew of OFAC sanctions, and OFAC says it “incorrectly believed that avoiding direct USD clearing on behalf of sanctioned parties was sufficient.” Most violations occurred in late 2011, after an executive order on 18 August 2011 greatly widened US sanctions on Syria. Management had actual knowledge of the conduct. See correspondent banking abuse.
The penalty
Non-egregious and voluntarily self-disclosed. OFAC credited the compliance programme already in place, a tolling agreement, and substantial remediation: a new Financial Security Charter adopted in 2013 from its largest shareholder’s policies, with that shareholder’s filtering software including an anti-stripping module and vessel screening, new training, exiting Sudan and Syria in all currencies and relationships with certain high-risk banks, and a compliance committee.
What the record shows
- Matching amounts and dates are the signal. The pattern shows only in a comparison of what a bank did for one client with what it did for others the same day.
- Avoiding a direct dollar leg is not avoiding the violation. A transfer on the bank’s own books followed by a mirror payment through the US was treated as the same dealing.
- OFAC’s compliance note: institutions with accounts for entities in jurisdictions that become comprehensively sanctioned should reassess continuing to serve them, particularly in dollars.