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Episode 209 – Schlumberger Settles Two OFAC Enforcement Actions



In a pair of enforcement actions, OFAC settled two separate actions involving Schlumberger Limited subsidiaries – the first involving Cameron International Corporation, and the second, Schlumberger Rod Lift, Inc., a former subsidiary, that was acquired by Lufkin Rod Lift, Inc.

In this Episode, MIchael Volkov reviews the two OFAC enforcement actions.

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financial payments

Global Logistics Company Settles OFAC Violations for $6.1 Million




You have to wonder how OFAC has the time to investigate and settle cases given its significant work implementing the Russia Sanctions Program.  But OFAC continues to demonstrate its commitment to aggressive enforcement. 

OFAC’s latest enforcement action focused on Toll Holdings Limited, a global logistics company that engaged in U.S. dollar transactions with prohibited entities.  Toll voluntarily disclosed the violations to OFAC but Toll was hit with a significant penalty — $6.1 million.

Toll is an international freight forwarding and logistics company based in Australia.  Toll agreed  to pay $6.1 million for 2,958 violations of multiple OFAC sanctions programs. Toll originated and received payments through U.S. banks involving sanctioned countries and individuals. Specifically, Toll arranged sea, air and rail shipment involving North Korea, Iran, Syria and Specially Designated Nationals (SDNs).

Between January 2013 and February 2019, Toll was involved in 2,958 payments in connection with shipments to and from North Korea, Iran, Syria and SDNs.  The payments totaled over $48 million and processed through four financial institutions in the US or foreign branches in the US.

The payments was divided among: 424 involved Mahan Airlines (327 of 424), Hafiz Darya Shipping Lines Company (97 of 424); and the remaining 2,534 transactions involved shipment to or from North Korea, Iran or Syria. These transactions involved 23 Toll entities in Asia, Europe, the Middle East and North America.

OFAC underscored the expansive global operations of Toll’s business operations. For example, Toll’s businesses would remit and receive payments in settlement of invoices for services performed by Toll for entities within its corporate structure, and Toll’s customers, agents, suppliers and other business partners.  Toll would frequently make or receive payments involving multiple shipments in a single invoice.  These invoices often contained transactions with sanctions countries or individuals as part of the overall charges.

Toll failed to adopt or implement policies and controls to prevent transactions involving OFAC-designated entities and individuals.  OFAC noted that Toll’s failure to implement reasonable compliance policies was the result of Toll’s rapid expansion without a commensurate increase in compliance resources.

Starting in 2007, Toll started to acquire a number of local or regional freight forwarding companies.  By 2017, Toll had almost 600 financial systems across its various business units.

Toll had a sanctions compliance policy but its personnel and associated controls did not keep up with the expanding risks stemming from its growing operations. By May 2015, Toll knew or had reason to know that various payments violated U.S. sanctions.

One of Toll’s banks restricted a subsidiary’s use of its U.S. dollar account after identifying a transaction involving Syria. To avoid potential bank blocking of a transaction, a Toll official instructed employee to avoid including the names of sanctioned jurisdictions on invoices going forward.  Subsequently, the bank raised concerns with Toll over compliance with U.S. sanctions.  Toll required documentation to demonstrate compliance with OFAC sanctions.

In July 2015, the CEO of one of Toll’s operating divisions emailed its employees reminding them of OFAC sanctions compliance.  Notwithstanding this communication, Toll’s primary bank continued to raise concerns about the efficacy of Toll’s controls. Toll’s compliance department repeatedly instructed business units to avoid transactions with prohibited countries, entities and individuals. But Toll failed to implement compliance policies and procedures to ensure compliance with sanctions.

In 2017, Toll introduced “hard controls” to disable country and location codes for ports and cities in sanctioned countries to prevent shipments to or from sanctioned countries.  Interestingly, of the 2,958 illegal payments, 2,853 occurred before Toll implemented these hard controls.

OFAC cited the fact that Toll acted with reckless disregard for OFAC’s sanctions over six year, notwithstanding Toll’s existing compliance initiative to comply with all applicable sanctions laws and multiple warnings from its bank.  After learning in May 2015 of potential violations of sanctions laws and regulations, Toll did not take immediate steps to address its continuing risks of transactions with prohibited entities. 

Toll received credit for voluntarily disclosing its conduct to OFAC and cooperated with the investigation by engaging a forensic accounting firm to analyze suspect financial transactions. To remedy its compliance deficiencies, Toll: (i) conducted a risk-mapping exercise to identify root causes of the violation; (ii) implemented an audit plan; (iii) restructured its compliance division; (iv) implemented a sanctions compliance division; (v) implemented “hard controls” in its freight management system; (vi) conducted risk-based screening of transactions, third parties and agents; (vii) ended all franchise relationships as part of a risk-mitigation strategy and adopted enhanced due diligence measures for on-boarding agents.

OFAC cited several significant themes under its “compliance considerations,” including the importance of instituting strong internal controls and procedures to govern payments involving affiliates, subsidiaries, agents or other counterparties; the risks posed by complex payment and invoicing arrangements; the need to respond promptly and fully to address compliance weaknesses when issues first arise and implement changes to address deficiencies in compliance programs, practices and procedures; and the need for entities to identify and implement measures to mitigate sanctions risks when merging or acquiring other companies.

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OFAC Closes Out Year with Two-Fisted Settlement with TD Bank



The Treasury Department’s Office of Foreign Asset Control had another consistent year – not a big year but continued adherence to its enforcement program.

At the end of the year, OFAC announced a settlement with TD Bank for $115,000 for two separate sanctions violations.

In the first, TD Bank illegally processed nearly 1,500 transactions that violated US sanctions against North Korea.  Interestingly, it does not appear that DOJ brought a separate enforcement action for these violations.

In the second enforcement action, TD Bank maintained two accounts for more than four years for a U.S. resident who was sanctions under the Foreign Narcotics Kingpin Sanctions Regulations.

In describing both actions, OFAC noted that the two cases resulted from multiple sanctions compliance breakdowns, including human errors and screening deficiencies.

North Korea Sanctions

TD Bank maintained nine accounts and processed nearly 1500 transactions totaling more than $382,000 for the North Korea mission to the United Nations.  The individuals had North Korean passports because it relied on a third-party customer screening product that omitted government officials from the PEP list for sanctioned countries. 

TD Bank employees also mistakenly identified the individuals as citizens from South Korea rather than North Korea.  In some instances, the employees left the citizenship field blank in the customer profile.  As a result, the TD Bank screening system failed to flag the North Korean government officials.

TD Bank voluntarily disclosed the violations.  No bank managers had “actual knowledge” of the suspicious accounts. OFAC also noted that it likely would have approved the transactions if TD Bank requested a license.  In response to the violations, TD Bank implemented remedial measures, including improved compliance controls and training.

Foreign Kingpin Customers

In the second violations, TD Bank opened and maintained accounts for Esperanza Caridad Maradiaga Lopez in 2016, three years after he had been added as a Specially Designated National (SDN).  A TD Bank employee authorized the account despite the fact that the “first and last name and date-of-birth matches” to Lopez’s SDN List entry.

Over the next four year, TD Bank’s screening system generated four alerts for Lopez’s accounts, but the bank failed to find that the alerts were “true hits.”  Interestingly, TD Bank locked Lopez’s accounts but the fraud unit was unaware of the sanctions-related reason for closing the caccount and caused one of Lopez’s accounts to re-open.  A few days later, TD Bank caught the error and closed the account again.

TD Bank voluntarily disclosed the violations.  No manager had actual knowledge of the conduct.  Again, TD Bank was credited for its remedial actions, including an explicit “sequence for adjudicating and escalating alerts.”  TD Bank provided additional clarity on how to define a name match.

Lessons Learned

OFAC noted that both cases underscore the importance of sanctions screening tools, internal escalation procedures and employee training.  “[B]oth matters highlight the need for comprehensive and thorough staff training, especially for employees tasked with reviewing customer onboarding information and adjudicating potential sanctions matches,” OFAC said. “Such training helps ensure that internal policies and procedures are followed and that potential matches are properly escalated consistent with those policies and procedures.”

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