By: John Black
The Office of Foreign Assets Control (OFAC) of the US Treasury Department announced on December 12, 2012 that the Bank of Tokyo-Mitsubishi UFJ, Ltd. (“BTMU”), Tokyo, Japan, agreed to pay $8,571,634 to settle apparent violations of US embargoes and sanctions on Burma, Iran, Sudan, Cuba, and persons involved in the proliferation of weapons of mass destruction. The violations occurred between April 3, 2006, and March 16, 2007.
According to OFAC, BTMU’s Tokyo operations concealed the involvement of countries or persons subject to U.S. sanctions in transactions that BTMU processed through financial institutions in the United States. Pursuant to written operational instructions utilized in a Tokyo operations center, BTMU employees engaged in stripping activities, which means they systematically deleted or omitted from payment messages any information referencing U.S. sanctions targets that would cause the funds to be blocked or rejected, prior to sending the transactions through the United States. These activities are similar to the so-called stripping activities for which many of the largest European banks have agreed to pay over $2 billion combined penalties to the US Government in the past.
According to OFAC, using its stripping practices, BTMU processed at least 97 funds transfers, with an aggregate value of approximately $5,898,943, through BTMU’s New York branch or other banks in the United States, in apparent violation of OFAC regulations. In 2007, BTMU’s senior management learned of these practices, it took the textbook correct actions: It began an internal review of historical transaction data and made a voluntary self-disclosure to OFAC.
OFAC said that it decided on the settlement amount based on its General Factors under OFAC’s Economic Sanctions Enforcement Guidelines in its regulations at 31 CFR Part 501, app. A. OFAC said these are the key factors that determined the amount of the penalty:
- BTMU’s conduct concealed the involvement of U.S. sanctions targets and displayed reckless disregard for U.S. sanctions;
- The general manager of the Operations Center in Tokyo knew or had reason to know that procedures had been implemented instructing employees to manipulate payment instructions;
- BTMU’s conduct conferred a substantial economic benefit to targets of OFAC sanctions;
- BTMU is a large, commercially sophisticated financial institution;
- BTMU has undertaken significant remediation to improve its OFAC compliance policies and procedures;
- BTMU substantially cooperated with OFAC’s investigation, including providing detailed and organized information regarding the apparent violations, and entering into a tolling agreement with OFAC; and
- BTMU has no history of prior OFAC violations.
OFAC determined that BTMU’s violations constitute an “egregious case” despite the BTMU internal investigation, voluntary disclosure, and clean record. Obviously, the fact that these violations were the result of intentional actions to evade the rules, as opposed to an oversight or misunderstanding of the rules, weighed heavily in OFAC’s decision to impose a significant penalty for this egregious case.