OFAC Settlement Demonstrates the Importance of Controls

You may have heard of a recent OFAC settlement with TD Bank, N.A. which resulted from violations of the North Korea Sanctions Regulations and the Foreign Narcotics Kingpin Sanctions. 

While you might be thinking it’s pretty low risk for someone on the OFAC list to walk into your institution and attempt to do business with you, there were some lessons learned on the importance of effective controls. 

A couple of breakdowns led to TD Bank’s issues:

  • The bank relied heavily on a third-party vendor’s Politically Exposed Persons (PEP) list that did not include government employees of sanctioned countries;
  • Employees failed to complete a citizenship field in customer profiles and/or incorrectly identified North Korea as “Korea” or “South Korea”; and,
  • OFAC alerts for “Esperanza Maradiaga Lopez” were dismissed for four years even though the date of birth the bank had on file matched “Esperanza Caridad Maradiaga Lopez”, a name on the OFAC List.  The alerts were dismissed due to there being no match on the full name and geographical location.

These breakdowns led to OFAC violations that spanned a four-year period.  There was no willful intent by the bank to violate OFAC sanctions and, in fact, remedial actions taken by the bank were mitigating factors that led to some grace in the penalty assessed.

This is a good reminder that controls are put in place for a reason.  It’s a good idea to test them regularly to ensure they’re functioning as intended.

Wondering what 2022 may have in store with respect to BSA/AML?  Be sure to check out our BSA/AML New Year Update webinar which is available now OnDemand!


Amy Kudlacek

Amy brings many years of banking and compliance experience to Banker’s Compliance Consulting. She has worked for both large and small financial institutions and spent time working in every area of a bank. She started out as a teller in college and eventually became a branch manager. Her love, however, was always compliance. Amy began her career with Banker’s Compliance Consulting in 2000. Her knowledge and experiences have allowed her to develop a well-rounded and practical approach to regulatory compliance. Amy is CRCM certified, has a Bachelors Degree in Business Administration and is a graduate of the ABA Compliance School. Amy & her husband have two children at home and stay busy following their activities. They spend a lot of time in the bleachers!

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