Citi Settles OFAC Sanctions Violations for $217,841

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Citigroup Inc. (C) has reached a settlement to resolve the issue of violating multiple sanctions programs of the Office of Foreign Assets Control (:OFAC). The company will remit $217,841, per an enforcement notice of the U.S. Treasury Department released on Wednesday.

U.S. Treasury’s OFAC administers and enforces economic and trade sanctions against foreign nations and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the United States.

The Issue

Per the notice, in the period between Apr 2, 2009 and Nov 16, 2009, Citigroup’s Malaysian trade services wing – Citi Penang – processed four export bill collection applications worth $638,074.15 on behalf of Citibank, Hong Kong. These applications involved shipping of goods to Iran. Also, there were two applications relating to the Islamic Republic of Iran Shipping Lines (:IRISL), which OFAC sanctioned in Sep 2008.

Though the bank had related documents of the bill collections that contained references to Iran and IRISL, operators of Citi Penang did not review or screen the bills of lading, certificates of origin, or shipment advice that contained the references.

Also, Citibank processed four fund transfers totaling $133,786.73 on Feb 9, 2010, Jan 12, 2011, Mar 8, 2011, and Oct 29, 2012. These involved entities, which stand in OFAC’s ‘List of Specially Designated Nationals and Blocked Persons.’ The bank’s interdiction software failed to identify the concerned sanctioned parties and the bank directly processed the payments without intervening into the matter manually.

The enforcement notice cited an instance, in which Citigroup obtained and processed a funds transfer for a customer whose name had a minor difference with a name of an entity which is on the sanction list. Citigroup, however, implemented a programmatic fix to this apparent violation and took corrective measures to ensure that specific name variations were added to its interdiction filter.

According to the notice, Citigroup offered full co-operation to the OFAC during the entire course of these investigations, which included a prompt response to OFAC’s requests for any information pertaining to the issues.

Bottom Line

The settlement amount seems too small to have any impact on Citigroup’s financials. However, amid several legal hassles that are yet to be resolved, the latest settlement brings some relief to this Wall Street banking giant.

Current, Citigroup carries a Zacks Rank # 3 (Hold). Some better-ranked stocks in the finance space include First NBC Bank Holding Company (NBCB), First Community Bancshares, Inc. (FCBC) and RCS Capital Corporation (RCAP). All these stocks sport a Zacks Rank #1 (Strong Buy).

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