Barclays pays $2.5m for apparent US sanctions violations

Barclays Bank Plc has agreed with OFAC a $2,485,890 settlement of its potential civil liability in connection with 159 apparent violations of US sanctions on Zimbabwe.  Barclays is said to have processed the prohibited transactions, totalling around $3.4m, through financial institutions located in the US, including its own New York branch, on behalf of corporate customers of Barclays Bank of Zimbabwe (BBZ) that were subject to sanctions.

In around 2005, local restrictions in Zimbabwe prevented Barclays from implementing compliance procedures in that country.  As a consequence, Barclays UK screened cross-border transactions involving BBZ or BBZ’s customers on its behalf, using the Zimbabwe branch’s electronic customer records and documentation.  There were several shortcomings with Barclays’ procedure, including system limitations that prevented BBZ from accurately capturing information on beneficial ownership, ambiguous and difficult Know Your Customer processes, and BBZ’s failure on updating paper records to also update the corresponding electronic records used by Barclays UK to screen for compliance.

Between October 2012 and September 2013, US financial institutions blocked funds transfers that Barclays New York processed on behalf of an entity beneficially owned by sanctioned firm Industrial Development Corporation of Zimbabwe, yet Barclays is said to have failed to upload identifying information for this entity to its sanctions screening filter in a timely or accurate manner once its internal investigation confirmed beneficial ownership following the initial blocked transfers.

OFAC found that, in spite of Barclays’ attempts to comply with sanctions while contending with constraints imposed by the local Zimbabwean authorities, the bank’s conduct was aggravated by its failure to implement adequate procedures despite numerous warning signs that its conduct could lead to a violation of US sanctions, and the fact that multiple business lines and personnel, including supervisory and management staff, had knowledge of or reason to know about the conduct that led to the apparent violations.  OFAC stated that Barclays’ conduct was mitigated by the absence of prior enforcement action against it, the remedial action it took in response to the apparent violations, its substantial cooperation with OFAC’s investigation, and its waiver of the statute of limitations in respect of the action against it.  OFAC also noted that the prohibited entities it dealt with were not publically identified or designated at the time of the transactions in question.

A link to OFAC’s enforcement notice is here.

This entry was posted in USA, Zimbabwe by Michael O'Kane. Bookmark the permalink.

About Michael O'Kane

Michael O’Kane is a partner and Head of the Business Crime team at leading UK firm Peters & Peters. Described as ‘first-rate’ (Legal 500 2012), he “draws glowing praise from commentators” (Chambers 2013) for handling the international aspects of business crime, including sanctions, extradition and mutual legal assistance. Called to the Bar in 1992 and prior to joining Peters & Peters he was a senior specialist prosecutor at the Crown Prosecution Service Headquarters(CPS). At CPS HQ he was a key member of a small specialist unit responsible for the prosecution of serious and high profile fraud, terrorist and special interest criminal matters including the Stansted Airport Afghan hijacking and the prosecution of Paul Burrell (Princess Diana’s butler). Michael joined Peters & Peters in 2002. He became a partner in May 2004, and Head of the Business Crime team in May 2009. Since joining Peters & Peters, Michael has dealt with a wide range of business crime matters. He has particular expertise in international sanctions, criminal cartels, extradition, corruption, mutual legal assistance, and FSA investigations. Described as“ an influential practitioner in fraud and regulatory work, so much so that he is top of the referral lists of many City firms for independent advice for directors” (The Lawyer’s Hot 100 2009), he was recognised as one of the UK’s most innovative lawyers in the 2011 FT Innovative Lawyer Awards and included in the list of the UK's leading lawyers in 'The International Who's Who of Asset Recovery 2012. In 2012 he was the winner of the Global Competition Review Article of the Year. Michael regularly appears on television and radio to discuss his specialist areas and he is the author of the leading textbook on the UK Criminal Cartel Offence “The Law of Criminal Cartels-Practice and Procedure” (Oxford University Press 2009). Recent/Current Sanctions Work • Representing 109 individuals and 12 companies subject to designation by the European Council under targeted measures imposed against Zimbabwe. This is the largest and most complex collective challenge to a sanctions listing ever brought before the European Court. • Acting for a former Egyptian Minister and his UK resident wife, challenging their designation by the European Council of Ministers under targeted measures brought against former members of the Egyptian Government. • Advising a company accused in a UN investigation report to have breached UN sanctions imposed in relation to Somalia. • Advising a UK company in relation to ongoing commercial relationships with an Iranian company listed under both EU and UN sanctions. • Advising an individual in relation to a UK investigation for alleging breaching nuclear export controls.

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