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August 20, 2013 

OFAC Announces Rare "Finding of Violation" for Failing to File Blocked Property Reports

OFAC's Office of Enforcement last week issued a rare "Finding of Violation" to Visa International Service Association for failing to file blocked property reports in a timely manner. Visa International Service Association (VISA), a subsidiary of Visa, Inc., operates retail electronic payment networks worldwide.

In this case, OFAC found that in 2007 VISA failed to file two initial blocked property reports in connection with accounts in which Iran's Bank Melli had an interest within 10 business days from the date that the property was blocked, as required by section 501.603(b)(1) of OFAC's Reporting, Procedures and Penalties Regulations. OFAC also found that VISA failed to file its 2008 annual blocking report in connection with the blocked Bank Melli accounts. Both of these alleged violations were voluntarily disclosed by VISA to OFAC in 2009.

OFAC also found that VISA violated the blocked property reporting requirements when VISA failed to report to OFAC blocked funds from a transaction with Syria's Real Estate Bank. VISA advised OFAC that it failed to meet the reporting deadline since it was attempting to determine whether or not fees owed to the bank should be deducted from funds before filing its blocked property report. 

Under OFAC's Enforcement Guidelines, which are found in Appendix A to Part 501 of the Reporting, Procedures and Penalties Regulations, a Finding of Violation is one of several outcomes resulting from an OFAC enforcement case. OFAC's Enforcement Guidelines make clear that a Finding of Violation will be issued if:

OFAC determines that a violation has occurred and considers it important to document the occurrence of a violation and, based on an analysis of the General Factors . . . .  [in the] Guidelines, concludes that the Subject Person's conduct warrants an administrative response but that a civil monetary penalty is not the most appropriate response . . . . A Finding of Violation may also convey OFAC's concerns about the violation and/or the Subject Person's OFAC compliance policies, practices and/or procedures, and/or identify the need for further compliance steps to be taken.
In this case, OFAC found that a Finding of Violation, rather than a civil penalty, was appropriate in this case for several reasons, including: 
  • A Finding of Violation is appropriate given that VISA is a large and commercially sophisticated financial institution whose failure to submit the initial and annual blocking reports to OFAC denied the U.S. government the benefit of accurate information in making its policy decisions, but did not result in an economic benefit being conferred to a sanctioned party. 
  • VISA had not received an OFAC penalty notice or Finding of Violation from in the five years prior to the date of the failure to report the blocked property. 
  • A Finding of Violation is likely to promote compliance with OFAC reporting obligations.
OFAC has issued Findings of Violation in very few cases. Unlike "Cautionary Letters", which can be issued when OFAC determines a civil penalty is not warranted, Findings of Violations can be made public.


Our law clerk Andrew Azorsky contributed to this report.

It took 4 years to determine a Finding of Violation on a Voluntary Disclosure!

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