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August 24, 2009 

OFAC Imposes $5.75 Million Penalty on Bank for Violating U.S. Embargoes on Sudan and Cuba

The Treasury Department's Office of Foreign Assets Control (OFAC) today announced that the Australia and New Zealand Banking Group, Ltd. of Melbourne, Australia (ANZ), remitted $5,750,000 to settle allegations that it violated the Sudanese Sanctions Regulations and the Cuban Assets Control Regulations related to the processing of transactions through U.S. correspondent accounts.

OFAC alleged that ANZ "actively manipulated the SWIFT messages related to the Sudanese transactions by removing references to Sudan or the names of entities subject to sanctions in the United States, thereby concealing the identities of the targets of U.S. sanctions and impeding the ability of U.S. banks to detect these violations." OFAC's announcement did not discuss the alleged violations of the Cuban Assets Control Regulations.

This settlement involved 16 transactions totaling $28 million involving alleged violations of the Sudanese Sanctions Regulations and 15 transactions worth $78 million involving alleged violations of the Cuban Assets Control Regulations. All of the transactions occurred between 2004 and 2006.

In its announcement, OFAC indicated that it mitigated the total potential penalty based on ANZ's cooperation and stated that:

Although ANZ did not voluntarily self-disclose the apparent violations of the Sudanese Sanctions Regulations, ANZ substantially cooperated with OFAC by conducting an extensive review of transactions. This review identified additional apparent violations of the Sudanese Sanctions Regulations of which OFAC was not aware, as well as apparent violations of the Cuban Assets Control Regulations, which ANZ voluntarily self-disclosed to OFAC.

As part of its remedial response, ANZ re-engineered its current operating model to enhance its ability to identify and resolve operational gaps and weaknesses. ANZ enhanced key OFAC procedures and policies to establish more effective controls with respect to potential OFAC violations. As part of its settlement with OFAC, ANZ has agreed to examine and, as necessary, further revise its policies and procedures to ensure, to the best of its ability, that transactions that would be in violation of OFAC’s regulations are not processed by or through United States financial institutions. ANZ will report findings of its examination to OFAC. The Australian Prudential Regulation Authority, ANZ’s primary Australian regulator, has agreed to review the results of the examination conducted by ANZ and monitor the resolution of any adverse findings.
In a statement issued by ANZ following OFAC's announcement, Chris Page, the bank's Chief Risk Officer said: “ANZ recognises that during the 2004 to 2006 period, the Bank’s compliance with US economic sanctions did not meet the high standards we expect" and that the bank "worked hard with regulators over the past three and a half years to comprehensively address the issues identified. This has included more robust policies and procedures, and a Group-wide sanctions compliance training program for staff.”

ANZ's statement noted that the measures taken by ANZ to strengthen compliance with economic sanctions have included:
  • Strengthening management and compliance oversight including new approval procedures.
  • Establishing additional full time roles dedicated to sanction compliance.
  • Enhancing sanction compliance awareness training.
  • Undertaking technology investments to upgrade automated sanction filters
The statement also confirmed that OFAC applied the increased penalties imposed by the IEEPA Enhancement Act "applied to the matters ANZ had disclosed to OFAC and that were then pending a decision by OFAC." (Although it should be noted that the IEEPA Enhancement Act penalties do not apply to violations of the Cuban Assets Control Regulations.)

Finally, ANZ stated that the "Australian Prudential Regulation Authority (APRA) has been kept informed of ANZ’s US economic sanction review, its remediation program and the dialogue with US regulators and APRA will continue to review the resolution of final remediation actions."

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