OFAC Fines Switzerland-Based Company US$3,740,442.00 For Sanctions Violations, Including For Cuba. Potential Fine Was US$276,441,312.00
/Office of Foreign Assets Control
United States Department of the Treasury
Washington DC
Enforcement Release: March 14, 2024
EFG International AG Settles with OFAC for $3,740,442 for Apparent Violations of Multiple Sanctions Programs
excerpts:
EFG International AG, a global private banking group based in Switzerland with approximately 40 global subsidiaries (collectively “EFG”), has agreed to pay $3,740,442 to settle its potential civil liability for apparent violations of multiple sanctions programs administered by OFAC. Between 2014 and 2018, EFG caused U.S. securities firms to process 727 securities-related transactions totaling $29,939,701 on behalf of customers in Cuba, 141 securities-related transactions totaling $468,615 for an individual blocked under the Kingpin Act, and, in 2023, five dividend payments, with a combined value of $1,200, for U.S.-custodied securities of a person blocked under Executive Order 14024 of OFAC’s Russia sanctions program.
The settlement amount reflects OFAC’s determination that EFG’s apparent violations were voluntarily self-disclosed and not egregious, and also reflects EFG’s significant remedial measures.
Description of the Apparent Violations
EFG’s subsidiaries and affiliates in various countries provide a range of financial services, including banking, investment, asset management, and securities brokering, to institutional customers and individuals worldwide. As further described below, EFG subsidiaries in several countries purchased and sold securities on behalf of foreign clients. These transactions were
conducted through and held in omnibus accounts with U.S. custodians and other U.S. market participants, including an EFG U.S. subsidiary. Because trades and other corporate actions completed through these omnibus accounts were generally made in the name of EFG, and not its underlying clients, these U.S. market participants were unaware that they were ultimately
processing securities transactions on behalf of persons sanctioned by OFAC.
Cuba Transactions
Between January 2014 and July 2018, EFG subsidiaries located in the Bahamas, Cayman Islands, Luxembourg, Monaco, and Switzerland processed 727 securities-related transactions and funds transfers totaling $29,939,701 through omnibus accounts at U.S. custodians or otherwise involving U.S. market participants, including EFG Miami, on behalf of clients who resided in
Cuba or whose beneficial owners were Cuban nationals.1 EFG’s clients included a Panamanian company beneficially owned by a person located in Cuba, two private investment firms domiciled in the British Virgin Islands and Panama whose ultimate beneficial owner was another Cuban national and resident, and individuals who EFG had reason to know resided in Cuba
based on residency cards they provided to their respective EFG subsidiaries. For 404 of these transactions executed on behalf of a family that included Cuban residents, EFG involved EFG Miami in a brokerage capacity. The securities transactions involved the purchase, sale, or redemption of securities positions that EFG had acquired for the clients, as well as corporate
actions such as interest payments or dividend distributions.
As a result of the conduct described above, between approximately January 2014 and September 2023, EFG processed 873 securities-related transactions—totaling $30,409,488—through U.S. custodians or involving U.S. person counterparties, in apparent violation of § 515.201 of the Cuban Assets Control Regulations, 31 C.F.R. part 515 (“CACR”); § 598.202 of the Foreign Narcotics Kingpin Sanctions Regulations, 31 C.F.R. part 598 (“FNKSR”); or § 587.201 of the Russian Harmful Foreign Activities Sanctions Regulations, 31 C.F.R. part 587 (“RuHSR”) (the “Apparent Violations”).
Penalty Calculations and General Factors Analysis
The statutory maximum civil monetary penalty applicable in this matter is $276,441,312. OFAC determined that EFG voluntarily self-disclosed the Apparent Violations and that the Apparent Violations constitute a non-egregious case. Accordingly, under OFAC’s Economic Sanctions Enforcement Guidelines (“Enforcement Guidelines”), 31 C.F.R. part 501, app. A, as of 2023, the base civil monetary penalty applicable in this matter equals the sum of one-half of the transaction value for each apparent violation, which is $10,686,977. The settlement amount of $3,740,442, of which $1,000,000 will be suspended pending satisfactory completion of certain compliance commitments, reflects OFAC’s consideration of the General Factors under the Enforcement Guidelines. OFAC determined the following to be aggravating factors: (1) OFAC determined that EFG failed to exercise due caution or care by failing to properly screen for and timely notify U.S. custodians and other U.S. parties about positions of blocked persons held in EFG omnibus accounts in the United States. (2) EFG at all times knew or had reason to know that it held securities on behalf of blocked persons in omnibus accounts at U.S. custodians or counterparties. (3) EFG processed 727 transactions totaling $29,939,701 involving multiple persons located in Cuba over the course of at least four years, thereby conferring economic benefit to a comprehensively sanctioned jurisdiction; EFG’s conduct also increased the nominal value of the blocked persons’ assets, as the transactions were not stopped in the United States and were instead processed through to the blocked customers’ accounts. OFAC determined the following to be mitigating factors: (1) EFG internally restricted the accounts to certain of its blocked clients, preventing them from realizing economic benefit from their accounts. (2) EFG has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the Apparent Violations. (3) EFG has taken significant remedial actions in response to the Apparent Violations, including: o Implementing internal restrictions to prevent credits/debits to sanctioned-client accounts and requiring compliance-function approval for any account activity of customers who are not blocked but present heightened sanctions risk; As of December 2023, EFG and OFAC had agreed to the settlement terms in principle. Therefore, OFAC applied
the 2023 Federal Civil Penalties Inflation Act values for the Apparent Violations.
