Updated: Sep 2, 2022
According to the Treasury Department's Office of Foreign Assets Control, a subsidiary of American Express agreed to pay $430,500 to resolve allegations that its network handled 214 transactions on behalf of a Venezuelan drug kingpin placed on the U.S. sanctions list (OFAC).
Walter Marquez was added to OFAC's List of Specially Designated Nationals and Blocked Persons (SDN List) on May 7, 2018, in connection with illegal drug sales and money laundering, according to a statement issued by the regulator on Friday.
According to the announcement, in 2012 Marquez got "a secondary American Express Centurion Card on an account managed by a U.S. individual at Amex." American Express National Bank was responsible for managing the account. In May 2018, when Marquez was added to the SDN List, Amex should have ceased processing transactions relating to the account. From May 7 through July 6, 2018, when the account was cancelled, Amex conducted 214 transactions totaling $155,189 due to a mix of human mistake and sanctions compliance software failures, according to OFAC.
The regulator highlighted that the suspected infractions were not notified voluntarily and that the situation was not aggravating.
The specifics: A few days following OFAC's designation of Marquez, Amex's internal sanctions list screening system triggered a "high confidence" warning on the account that named Marquez as a subsidiary. The warning was incorrectly closed by an analyst, who also failed to follow Amex's policy requiring a second-level review, according to the enforcement announcement.
The following day, orders were issued to suspend the card immediately, however the person who submitted the suspension code omitted to include remarks indicating that the restriction was due to penalties. The next day, when the U.S. account holder phoned Amex, a customer service employee lifted the suspension.
The next day, Amex's anti-money laundering (AML) staff discovered the error and re-suspended the account. The staff that reinstated the suspension incorrectly applied the suspension code, allowing the account to perform seven further transactions before it was shuttered on July 6, according to a press statement.
OFAC stated that Amex complied with the inquiry and adopted corrective procedures to address the issues identified by the apparent breaches, including:
Implementing reporting and automated tools to ensure a second-level examination of sanctions alerts with high certainty;
Launching a centralised account suspension system that cannot be removed without the approval of Amex's sanctions compliance team;
"Launching a sanctions referral flag in Amex's AML case management system to enable automated escalation to Amex's sanctions compliance team of AML cases with a potential sanctions nexus";
and Additional training for relevant personnel and additional quality control testing to ensure consistency and accuracy in the handling of a potential sanctions violation.
OFAC noted that "this action underlines the necessity of properly teaching staff on sanctions compliance processes and ensuring that these procedures are implemented effectively, particularly when high-confidence alerts are produced." Additionally, consistent implementation of enterprise-wide compliance procedures, including controls to prevent other departments or individuals from overturning a sanctions-related decision to suspend an account, can assist reduce the likelihood of a sanctions violation.
Amex responded with the following statement: "We take our sanctions compliance requirements seriously and have fully cooperated with OFAC's inquiry. Since this incident happened four years ago, we've made substantial improvements to our controls and processes, including the implementation of extra training and strengthened screening and reporting standards for penalties.
By fLEXI tEAM