Banco Colpatria, S.A. Settles Narcotics Trafficking Sanctions Violations

Aug 20, 2010   

On August 19, 2010, the Office of Foreign Assets Control, (“OFAC”), of the U.S. Department of the Treasury announced that it has reached a settlement with Banco Colpatria, S.A., (“Colpatria”), for alleged violations of OFACs Narcotics Trafficking Sanctions Regulations. The alleged violations stem from activities of Colpatrias Miami Agency which discontinued operations in 2007. OFAC is a part of the U.S. Department of the Treasury and administers and enforces economic sanctions against targeted foreign countries, regimes, terrorists, international narcotics traffickers, among others.

OFAC alleged that Colpatria Miami violated the Narcotics Regulations through a series of wire transfers which occurred between November 22, 2004 and May 24, 2005. OFAC stated that Colpatria Miami made 26 wire transfers on behalf of one corporate client after OFAC had designated the clients beneficial owners are Special Designated Narcotics Traffickers, (“SDN”).

Colpatria initially screened the names of the beneficial owners against the Specially Designated Nationals and Blocked Persons List when the account was opened; however, it did not screen the names after the list was updated by OFAC.

The penalty for these violations was initially set at $229,623; however, this amount was reduced by OFAC to $91,849. OFAC stated that the settlement amount was reduced because Colpatria voluntarily self reported to OFAC though it did not admit or deny liability, Colpatria revised its software to review automatically the names of beneficial owners of accounts rather than just names of account holders when performing account opening and periodic name checks, and because Colpatria signed a tolling agreement with OFAC.

This case highlights the importance of 2 crucial aspects of international banking. First, this case highlights the importance of monitoring government announcements, such as OFACs SDN list which is regularly updated and publicly available. Additionally, this case highlights the importance of self reporting OFAC violations. Indeed, self reporting can help otherwise compliant banks avoid criminal prosecution and aggravated fines, and can also help banks maintain good working relationships with OFAC and other agencies within the Department of Treasury.

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