Puerto Rican Bank Violated Venezuela Sanctions, OFAC Says
Puerto Rico-based Nodus International Bank violated U.S. sanctions against Venezuela when it allowed an undisclosed sanctioned person to open and operate several accounts, the Office of Foreign Assets Control said Oct. 18. The bank also violated U.S. sanctions reporting regulations because it failed to maintain accurate records of its handling of the blocked property, OFAC said. The agency issued the bank a “Finding of Violation” instead of a fine due to several mitigating factors, including the fact that Nodus voluntarily disclosed the violations.
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OFAC said the violations involved a person the agency added to its Specially Designated Nationals List in 2017. The person held several accounts with Nodus as well as an interest in securities issued by Nodus before the individual was designated. After learning of the designation, Nodus’s board of directors decided to sever ties with the designated individual and submitted a blocked property report to OFAC after blocking the persons’ accounts, which included two time deposit accounts, a savings account and an outstanding credit card balance.
OFAC also said Nodus, in an effort to sever ties with the sanctioned person, redeemed the blocked person’s securities and put the proceeds into a blocked account without obtaining a license from OFAC to deal in blocked property. The agency said Nodus did this despite assuring the Commissioner of Financial Institutions of Puerto Rico (OCFI) that it would apply for a license.
Nodus also, “as a result of human error,” allowed an “automatic debit from one of the blocked person’s blocked accounts in order to credit the blocked credit card account,” OFAC said. “Nodus then wrote off the balance of the blocked credit card account.”
The bank also violated OFAC’s sanctions reporting regulations when it informed the agency during OFAC's investigation that it no longer maintained access to records or communications related to the bank’s handling of the blocked property, noting that the bank’s compliance officer had left and the bank's systems had not kept records or communications of the action. Nodus submitted several “inconsistent” Annual Reports of Blocked Property to OFAC in the following years, the agency added.
OFAC said Nodus ultimately engaged in three transactions totaling over $50,000, failed to maintain records related to the handling of the blocked accounts and failed to report the blocked accounts accurately. Although the bank "failed to exercise a minimal degree of caution" and engaged in transactions involving blocked property without obtaining a license even though senior managers at the bank were aware one was needed, OFAC also said there were various mitigating factors.
OFAC noted that Nodus is a small financial institution that had not received a penalty notice from OFAC in the previous five years, the bank voluntarily self-disclosed the violations, the sanctions harm was not "significant," and Nodus took numerous remedial measures after the violations. This included hiring OFAC compliance experts to give “specialized training” to all Nodus employees, hiring an in-house lawyer to assist its compliance department and updating its practices surrounding blocked accounts. Nodus’ software provider also implemented “user controls” that require the compliance department’s approval for “any action affecting a blocked account,” OFAC said, and the bank updated its recordkeeping requirements to make sure it “maintains appropriate records related to blocked property.”
The action "emphasizes that financial institutions should properly maintain blocked property and records, report such information accurately ... and obtain a specific license ... in order to deal in blocked property," OFAC said. The agency also said banks should make sure they receive “all necessary licenses” from OFAC before dealing in blocked property and clearly communicate OFAC’s sanctions requirements “among an institution’s compliance and business lines.”
Nodus didn't immediately respond to requests for comment.