OFAC Fines TD Bank for Sanctions Violations Stemming From Compliance 'Breakdowns'
The Office of Foreign Assets Control fined TD Bank about $115,000 for two separate instances of sanctions violations, the agency said Dec. 23. The bank illegally processed nearly 1,500 transactions that violated U.S. sanctions against North Korea and maintained two accounts for more than four years for a U.S. resident who was sanctioned under Foreign Narcotics Kingpin Sanctions Regulations. OFAC said both cases resulted from “multiple sanctions compliance breakdowns,” including human errors and screening deficiencies.
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In the first instance, the bank maintained nine accounts and processed 1,479 transactions totaling more than $382,000 -- without an OFAC license -- on behalf of the North Korean mission to the U.N. Although the people had North Korean passports, TD Bank’s compliance system didn’t generate an alert during the customer screening process because it “relied heavily on a vendor-supplied Politically Exposed Persons (PEP) list,” which didn’t include government employees of sanctioned countries.
Bank employees also misidentified North Korea as South Korea or sometimes left the citizenship field blank in customer profiles. Because of this, the bank’s screening system didn’t flag the accounts.
OFAC said the violations were voluntarily self-disclosed and constitute a nonegregious case. Mitigating factors included that no bank managers had “actual knowledge about the subject accounts or transactions” and all the nearly 1,500 transactions to the North Korean mission would likely have been authorized under an OFAC license. The bank also said it took a range of remedial measures, including improved compliance controls and training.
Aggravating factors included that the bank “failed to exercise due caution or care in processing” the transactions and had “reason to know that it maintained accounts for North Korean nationals.” It also said TD Bank is a “large and commercially sophisticated financial institution” that operates globally.
In the second instance, the bank opened and maintained accounts in 2016 for Esperanza Caridad Maradiaga Lopez, who was added to OFAC’s Specially Designated Nationals List in 2013. OFAC said a reviewer for TD Bank authorized the account despite “first and last name and date-of-birth matches to” Lopez’s SDN List entry.
The bank’s screening system generated four alerts over the next four years for Lopez’s accounts, but the bank didn’t determine the alerts to be a “true hit” until the fifth alert in February 2020. The bank locked Lopez’s accounts, but the bank’s fraud unit, “unaware of the sanctions-related reason for account closure,” credited one of Lopez’s accounts and caused it to reopen, OFAC said. The bank caught the mistake a few days later and closed the account again.
OFAC said the violations were voluntarily self-disclosed and constitute a nonegregious case.
Mitigating factors included that no bank managers had “actual knowledge regarding the conduct that led to the apparent violations” and that the transactions likely would have been licensable. The bank also took remedial actions to improve its compliance program, including implementing an “explicit sequence for adjudicating and escalating alerts” and putting in place “more specific standards and examples for determining a name match.”
Aggravating factors included TD Bank’s failure to “exercise due caution or care for U.S. economic sanctions requirements” and that it authorized more than $35,000 in transactions to a person on the SDN List. Another aggravating factor was that the bank is a large and sophisticated global company.
The agency said both cases highlight 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.”
A TD Bank spokesperson called the settlement a "fair resolution" and pointed to the fact that it voluntarily disclosed the violations. "AT TD Bank, we have stringent processes and procedures in place that reflect our strong and unwavering commitment to U.S. sanctions compliance," the spokesperson said in a Dec. 23 email.