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Wells Fargo has been fined $98 million for facilitating sanctions breaches in Iran, Syria, and Sudan

Wells Fargo will pay nearly $98 million to resolve allegations that a subsidiary facilitated $532 million in prohibited transactions in violation of sanctions against Iran, Syria, and Sudan.

The Federal Reserve Board fined Wells Fargo $67.8 million for oversight failures on Thursday, while the Treasury Department's Office of Foreign Assets Control (OFAC) fined the bank $30 million for providing a trade finance platform to a foreign bank, which then used the platform to process 124 apparent prohibited transactions between 2010 and 2015.


According to OFAC, Wells Fargo self-reported the alleged violations, which were classified as egregious.


In its assessment order, the Fed stated that Wells Fargo failed to recognise and address the legal and compliance risks involved with the transactions, and that this failure constituted an unsafe or unsound practise. When the bank notified the apparent violations to the Fed and OFAC in December 2015, it shut down the platform's use.


Wells Fargo previously stated in May 2022 that it was in talks with federal agencies about possible sanctions violations.



Compliance implications: In 2008, Wells Fargo merged with Wachovia Bank, which had given a foreign bank a customised version of its trade finance software platform dubbed "Eximbills." The system was used by the foreign bank to handle non-US transactions. According to the Fed, dollar trade finance instruments exist outside of the US banking system. According to the Fed, Wells Fargo continued to provide the software infrastructure through its subsidiary, Wells Fargo Bank, until 2015.


“There is no indication that Wachovia’s or Wells Fargo’s senior management either directed or had actual knowledge” of the use of the system by the foreign bank to engage in transactions with OFAC-sanctioned jurisdictions and persons, according to OFAC, but Wells Fargo’s senior managers “should reasonably have known” the foreign bank was using the system to engage in transactions with sanctioned jurisdictions and persons.


OFAC stated that after the merger, Wells Fargo employees "raised on multiple occasions, including to top management, the potential sanctions-related risks resulting from the trade insourcing relationships it acquired from Wachovia." However, according to the regulator, Wells Fargo did not have a mechanism in place to review the foreign bank's use of Eximbills for OFAC compliance. According to OFAC, it took nearly seven years for Wells Fargo to stop using Eximbills to handle these transactions using technology located at a bank branch in Hong Kong and a data facility in North Carolina.


After reporting the violations, Wells Fargo performed a thorough internal investigation, according to OFAC. According to the Fed, Wells Fargo "remediated the OFAC regulations violations linked to Eximbills, strengthened firmwide compliance with OFAC regulations, and fully cooperated with the Board of Governors."


Wells Fargo response: In an emailed statement, a Wells Fargo spokesperson said the bank “is pleased to resolve this legacy matter involving conduct that ended in 2015, which we voluntarily self-reported and fully cooperated with OFAC and the Federal Reserve Board to address.”

By fLEXI tEAM

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