Deutsche’s Compliance Procedures Limit Damage of Sanctions Settlement
14 Sep 2020

A U.S. unit of Deutsche Bank AG paid a fraction of the maximum penalty it could have faced to settle alleged sanctions violations, as the Treasury Department pointed to the bank’s compliance efforts and cooperation as mitigating factors.

Deutsche Bank Trust Co. Americas agreed to pay $583,100 in settlements resolving claims that it violated U.S. sanctions, the Treasury Department said. The sum of the settlement between the bank and the Treasury’s Office of Foreign Assets Control, which enforces sanctions, is minuscule compared with the $75 million maximum civil penalty the company could have faced. Details of the enforcement action by OFAC outlined steps taken by the company and other mitigating factors that led to penalty reductions.

The combined settlement focused on two alleged violations. The New York-based Deutsche unit agreed to pay $157,500 for processing a large transaction involving a sanctioned oil company in Cyprus, and $425,600 for processing dozens of payments destined for accounts at a sanctioned Russian financial institution, the Treasury said Wednesday.

“We are pleased to put this matter behind us,” a Deutsche Bank representative said. “DBTCA cooperated fully with OFAC’s investigations and promptly implemented remedial measures to improve its sanctions controls.”

The first case dates to August 2015, when the Deutsche unit processed a $28.85 million payment related to purchases of fuel oil in which IPP Oil Products (Cyprus) Ltd. had an interest, the Treasury said. Payment instructions for the transactions didn’t refer to IPP, which had been blacklisted by OFAC that year, the Treasury said. The bank believed that IPP no longer had an interest in the property, but didn’t do enough due diligence to confirm that, according to the Treasury.

The company could have faced a $57.7 million penalty for that alleged violation, the Treasury said, but OFAC credited the company for maintaining a sanctions compliance program at the time of the alleged violation and cooperating with the investigation. OFAC also said the bank agreed to review the alleged lapse with its U.S. sanctions compliance unit and offered to conduct training and change internal procedures.

The case illustrates the need for companies to examine a blacklisted entity’s interest in a property from OFAC’s perspective, said Cari Stinebower, a partner at law firm Winston & Strawn LLP. “OFAC’s definition is broader than you think in a typical contractual context,” she said.

In some cases, a residual interest could remain after a property is sold and a blacklisted entity is presumably separated from the property, she said.

By Mengqi Sun and Jack Hagel, The Wall Street Journal, 11 September 2020

Read more at The Wall Street Journal

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