TREASURY AND EFG INTERNATIONAL REACH SETTLEMENT AGREEMENT OVER APPARENT SANCTIONS VIOLATIONS
April 11, 2024
On March 14, 2024, the OFAC announced a settlement agreement with EFG International AG (“EFG”) to resolve potential civil liability relating to EFG’s processing of some 873 securities transactions. As a global private banking group based in Switzerland, EFG oversees approximately 40 global subsidiaries providing a range of financial services, including the purchase and sale of securities on behalf of foreign clients. After determining that the company processed securities-related transactions for customers in Cuba, a comprehensively sanctioned jurisdiction, and for other sanctioned individuals, including a Specially Designated Narcotics Trafficking Kingpin (“SDNTK”), EFG agreed to pay $3,740,442 to settle the apparent violations of multiple sanctions programs.
Notably, the transactions at issue were conducted through and held in omnibus accounts with U.S. custodians and other market participants, underscoring the sanctions risk that financial institutions with foreign clients undertake when using omnibus accounts at U.S. firms. While EFG subsidiaries imposed internal restrictions on the questionable accounts of sanctioned individuals, the subsidiaries failed to notify their U.S. custodian or other U.S. securities firms transacting the impacted omnibus accounts, leading to continued processing of securities transactions on behalf of sanctioned parties. Upon discovering the failures to properly notify U.S. custodians transacting omnibus accounts for OFAC-designated clients, EFG took remedial measures. For instance, EFG implemented internal restrictions to prevent credits/debits to sanctioned-client accounts and required approval for account activity of any clients presenting a heightened sanctions risk. In addition to fully cooperating with the investigation, the OFAC cited EFG’s subsequent remedial measures when determining that the apparent violations were voluntarily disclosed and not egregious.
The settlement displays that U.S. firms often lack direct insight into underlying sub-accounts given omnibus account structures, meaning that foreign financial institutions should establish procedures to reduce the likelihood that U.S. firms inadvertently service sanctioned parties or jurisdictions. To avoid inadvertent violations of sanctions programs, companies with U.S. omnibus accounts should refer to OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”) to screen clients. Doing so facilitates the prompt identification of sanctioned parties and further expediates notification to affected U.S. firms.
If you have any questions, please contact Evelyn Sahr at 202.659.6622 or esahr@eckertseamans.com; Drew Derco at 202-659-6665 or dderco@eckertseamans.com; Jay Julien at 202.659.6648 or jjulien@eckertseamans.com, or any other attorney at Eckert Seamans with whom you have been working.
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