OFAC News and Regulations

JPMorgan Settles with OFAC for $5.26 Million over illicit financial transactions that violated multiple sanctions programs

JPMorgan Chase Bank (JPMC) officially settled with the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) after the company was caught violating multiple sanctions programs, including the Cuban Assets Control Regulations (CACR), the Iranian Transactions and Sanctions Regulations (ISTR), and the Weapons of Mass Destruction Proliferators Sanctions Regulations (WMDPSR).

OFAC also issued a Finding of Violating to the bank in regards to the Foreign Narcotics Kingpin Sanctions Regulations (FNKSR) and the Syrian Sanctions Regulations (SSR).

According to OFAC, the base penalty totaled $7.79 million and the bank settled with the department, agreeing to pay $5.26 million.

In its findings, the department determined that JPMC resolved several transactions “among various airlines” for its client, many of which violated current sanctions programs.

“Between approximately January 3, 2008 and February 8, 2012, JPMC processed 87 transactions through the U.S. financial system that may have contained interests attributable to a sanctions-targeted party,” wrote OFAC in its official statement.

OFAC explained its decision, listing the following factors as justification:

  • JPMC exemplified “reckless disregard” for current sanctions compliance programs when it failed to properly screen foreign businesses and non-U.S. person entities against OFAC’s Specially Designated Nationals and Blocked Persons Lists, despite having the right tools to screen their clients adequately.
  • The bank engaged in a “pattern of conduct” in which it missed several red flags and warnings, of which some appeared as early as 2011.
  • JPMC helped several sanctioned parties financially benefit, despite being a “large and commercially sophisticated financial institution.”

OFAC also listed the following mitigating factors in their decision:

  • Managers and supervisors at JPMC appeared to not know about these violations.
  • The total harm caused by these violations was less than the total value of the transactions themselves.
  • JPMC acted as a willing participant in OFAC’s investigation.
  • JPMC has developed a plan of action to prevent problems like these from occurring again in the future.

The department stated that they were satisfied with the outcome of the investigation and settlement, noting that the “enforcement action highlights the risks associated with a U.S. person failing to take adequate steps to ensure that transactions that it processes are compliant with U.S. economic sanctions laws.”

Lessons to be learned—screen, then report as necessary

While JMCP had an OFAC watch list screening tool in place, this case demonstrates the importance of educating staff about the critical role OFAC screening plays in the area of U.S. homeland security. Not only should screening take place for each and every transaction, but organizations also need to have the appropriate checks and balances in place to escalate and report red flags as soon as they arise.