The New York branch office of the National Bank of Pakistan (NBP) has agreed to pay $28,800 to settle alleged violations of the Office of Foreign Assets Control (OFAC) Global Terrorism Sanctions Regulations. This stems from a series of funds transfers processed by the bank to an entity on OFAC’s Specially Designated Nationals (SDN) List.
According to its press release, OFAC added Kyrgyz Trans Avia, an airline headquartered in Bishkek, Kyrgyzstan, to the SDN List on May 31, 2013. They further allege that – between June 6, 2013 and January 31, 2014 – NBP’s New York office processed seven fund transfers totaling $55,952. These funds were either originated by, or destined for, the account of “LC Aircompany Kyrgyztransavia” in Bishkek. OFAC claims that the bank’s restricted party screening software failed to generate an alert or identify a possible match in connection with these transfers, and that the transfers were processed without any further review or analysis by the bank.
It’s interesting to note both the aggravating and mitigating factors in this case. OFAC cites the following aggravating factors:
- NBP New York processed seven transactions involving an SDN, five of which conferred economic benefit to a sanctioned party and resulted in harm to the sanctions program objectives
- NBP New York is a sophisticated financial institution
- NBP New York’s OFAC interdiction filter failed to generate an alert to an SDN in seven separate transactions.
On the other hand, the following were cited as mitigating factors:
- No NBP New York managers or supervisors were aware of the conduct that led to the apparent violations
- NBP New York has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the earliest date of the apparent violations
- NBP New York took appropriate remedial action in response to the apparent violations and took steps to enhance its OFAC interdiction filter
- NBP New York cooperated with OFAC’s investigation
One would have to assume that part of NBP’s corrective action steps included finding a new software vendor, or – at the very least – adjusting the “fuzzy logic” filter to a more restrictive setting. Among other things, this case illustrates that not all restricted party software is the same! It also highlights the risks faced by some financial institutions with U.S. locations and foreign parent companies.
Tom Reynolds is the Vice President of Operations for Export Solutions, a consultancy firm which specializes in helping companies with import/export compliance.