Shearman & Sterling LLP
Issue link: https://digital.shearman.com/i/1422677
16 result, the bank's screening tools failed to capture the connections to Sudan and resultant violations of U.S. sanctions. Further, OFAC alleged that BOC UK demonstrated a "reckless disregard" for U.S. sanctions requirements by processing transactions through the U.S. financial system for entities in Sudan despite having reason to be aware of its customers' Sudanese connections and that certain personnel involved in processing the transactions were aware the entities were located in Sudan. Nonetheless, in determining the penalty amount, OFAC noted that the transactions were non-egregious and voluntarily self-disclosed. BOC UK agreed to remit $2,329,991 to settle its potential liability. On August 27, Romanian bank First Bank SA and its U.S. parent, JC Flowers & Co., agreed to pay $862,318 to settle potential civil liability for First Bank's processing of transactions in apparent violation of OFAC's Iran and Syria sanctions. Specifically, OFAC alleges that First Bank processed 98 commercial transactions totaling $3.5 million through the U.S. financial system on behalf of parties located in Iran and Syria. The 98 transactions were voluntarily disclosed to OFAC after First Bank commenced a five-year lookback prompted by a Syria-related payment that was flagged by First Bank's Romanian regulator, the National Bank of Romania. According to the settlement agreement, First Bank's lookback identified three types of prohibited transactions: (1) processing U.S. Dollar payments for individuals and entities in Syria; (2) processing U.S. Dollar payments for individuals and entities in Iran; and (3) processing Euro-denominated payments to Iran after First Bank became a foreign subsidiary of JC Flowers, a U.S. person. According to OFAC, First Bank did not understand the extent to which U.S. sanctions regulations applied to financial institutions without a physical presence in the United States. For example, First Bank's compliance program did not address the risk that First Bank could be indirectly exporting financial services through the U.S. financial system to sanctioned parties, or that violations could occur by processing transactions that did not transit the United States but were nonetheless processed while majority- owned by JC Flowers. The settlement amount reflects OFAC's determination that the apparent violations were voluntarily self-disclosed and non-egregious. On September 9, OFAC announced a settlement agreement with Texas-based NewTek, Inc. for apparent violations of sanctions against Iran. NewTek develops and supplies live production and 3D animation hardware and software systems. The settlement agreement alleges that between December 2013 and May 2018, NewTek indirectly exported goods, technology, and services from the United States to Iran through third-country distributors. More specifically, NewTek entered into two agreements with companies located in France and the United Arab Emirates which authorized the distribution of NewTek's products in the Middle East. At the time of negotiating the agreements, NewTek, including its Chief Operating Officer, apparently knew that the distributors intended to sell its products to a reseller in Iran who, in turn, sold NewTek products to Iranian entities on OFAC's SDN List. NewTek further violated U.S. sanctions on at least three occasions by providing support, software updates, reseller training, or other services in support of sales to customers located in Iran. NewTek agreed to remit $189,483 to settle the apparent violations. In determining the penalty amount, OFAC noted that NewTek voluntarily self-disclosed the apparent violations and that they constituted a non-egregious case. On September 27, OFAC announced a settlement agreement with U.S.-based Cameron International Corporation for supplying goods to Gazprom-Neft Shelf, a Russian energy firm designated for Sectoral Sanctions under Directive 4 of E.O. 13662. Directive 4 prohibits U.S. persons from engaging in the supply of goods, services, or technology in support of exploration or production for deep-water, Arctic offshore, or shale projects that benefit the Russian Federation or certain companies. Cameron, a Texas-based supplier of oil-and-gas goods and services, is a subsidiary of Schlumberger Limited. OFAC alleges that, between July 2015 and November 2016, senior U.S. managers at Cameron approved five contracts for its subsidiary, Cameron Romania S.R.L., to supply goods to Gazprom-Neft Shelf's Prirazlomnaya offshore oil production and exploration platform, located in the Russian Arctic. According to OFAC, the connection of the goods to the oil and gas project was well known at the time of approval. For example, many of the contracts referenced the offshore project and that the goods were destined for the Russian Arctic. According to OFAC, although Cameron itself had procedures in place designed to ensure that transactions with Russian firms would not violate U.S. sanctions, those controls failed to indicate when a U.S. person's involvement in the activities of Cameron's foreign subsidiaries could have fallen within the applicable prohibitions of Directive 4. To settle the apparent violations, Cameron agreed to remit $1,423,766. In determining the penalty amount, OFAC noted that Cameron did not voluntarily self-disclose the apparent violations but determined that they constituted a non-egregious case.