Up, up and away! U.S. sanctions enforcement penalties reach new half year record

According to analysis we have undertaken of data available on the OFAC website, total U.S. sanctions enforcement penalties for the first six months of 2019 has reached $1.28bn, exceeding the previous full year peak reported by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) of $1.21bn for 2014.

In particular, we noted the following major findings:

• Two record high penalties since 2015 were announced by OFAC in April 2019, each of more than $600m (offset by payments to other U.S. federal agencies) and each against a major non-US bank. Both the banks also had to pay additional penalties to other U.S. and/or UK authorities, making their total penalties an astonishing $2.4bn. 
• Sanction enforcement actions that include Iran-related conduct have overall accounted for a significant percentage of penalties by OFAC. 25 out of the 41 cases since 2017 related in whole or in part to Iran, accounting for 98.7% of total OFAC penalties since 2017.2019 H1 has also seen the very first Russia Sectorial Sanction enforcement action: a $75,375 penalty on a U.S. software company, which accepted invoice payments from a Russian oil company identified by OFAC on the Sectoral Sanctions Identification List that were made after the 90-day debt maturity period then permitted by Sectoral Sanctions Directive 2.
• Across sectors, our analysis showed that financial companies, especially global banks that deal with high volumes of transactions involving entities around the world, remain the most penalized since 2018, accounting for 98% of total OFAC penalties in the last 18 months. Global banks also have a much heavier penalty per enforcement action than counterparts in other sectors.

Avoiding risk associated with U.S. economic sanctions has become increasingly important for clients navigating global transactions. This year has seen record high penalties from OFAC enforcement actions - and it is only the middle of the year. This clearly demonstrates the seriousness with which the United States takes these matters.

The seriousness of sanction compliance is emphasized by OFAC’s decision to clarify expectations for compliance programs in formal guidance and to publish a list of leading root causes of apparent sanctions violations. We have previously blogged about OFAC’s guidance, here. Global institutions should check their compliance programs against the guidance and root causes to prevent missteps and potential enforcement consequences.