A financial institution involved in travel-related and credit card services settled OFAC charges for violations of the Weapons of Mass Destruction Proliferators Sanctions Regulations.
According to OFAC, the financial institution erroneously issued a prepaid card to an individual designated as a Specially Designated National ("SDN") due to human error and screening system defects (apparently, the system "timed out" after a non-U.S. bank submitted multiple requests for the card on behalf of the SDN).
OFAC stated that while the provision of the prepaid card provided economic benefit to the SDN, the financial institution (i) did not willfully engage in reckless behavior, (ii) was unaware that it had provided a card to an SDN and of the systems error, (iii) addressed the errors to prevent similar future violations, (iv) fully cooperated with OFAC during its investigation and (v) had not violated OFAC regulations in the five years preceding any of the transactions made by the SDN. As a result, OFAC did not impose a civil monetary penalty.
Commentary
While OFAC did not assess a monetary penalty, it did indicate that the failure of technology was a "critical shortcoming" of the financial institution's compliance program - and something that a "large, commercially sophisticated financial institution" probably should have detected. These comments signal the importance of regularly checking all technology systems (not just sanctions systems) for various kinds of failures, though whether the failure was one that could have been caught through such testing is not obvious.
Primary Sources
Originally published April 30, 2020
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