On June 20th, the Office of Foreign Asset Control (OFAC) announced that Swedbank Latvia AS, a subsidiary of Swedbank AB, has agreed to pay about $3.5 million to settle apparent violations of OFAC sanctions. OFAC sanction screening is essential for financial institutions to ensure that no regulations are broken. The alleged conduct occurred before Russia’s 2022 invasion of Ukraine and the ensuing sanctions. After Russia’s invasion of Crimea in 2014 and throughout 2015 and 2016, a client of Swedbank used their e-banking platform from Crimea. Russian forces had seized the Crimean Peninsula from Ukraine in 2014 and then annexed the territory. In response, the US imposed a ban on doing business in the newly annexed Crimea region.
The client initiated 386 transactions totaling $3,312,120 processed through US correspondent banks. The transactions were processed through US correspondent banks, establishing US regulators’ jurisdiction. According to OFAC, if the IP data of the client had been screened it would have indicated that the client was present in Crimea. The OFAC sanction screening error resulted in the violations and eventual fine.
In early 2020, Swedbank was fined $386 million by the Swedish Financial Supervisory Authority for AML compliance program failures. Swedbank AB and Swedbank Latvia have taken significant steps to remediate in response to the Apparent Violations. OFAC has taken this and other factors into consideration to mitigate the fine, as the base monetary penalty was $6,238,000.
Swedbank reported the transactions to OFAC and Tomas Hedburg, Swedbank’s deputy president has stated, “Swedbank takes the historical shortcomings seriously…“.
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