December 12, 2023

Nasdaq pays $4 million to settle subsidiary’s apparent ITSR violations

On December 8, 2023, the US Department of the Treasury’s Office of Foreign Assets Control announced a settlement with Nasdaq, Inc., resolving the company’s potential civil liability for 151 apparent violations of US sanctions on Iran.

Nasdaq, Inc. is a financial services corporation headquartered in New York.  The company owns  and operates stock exchanges all over the world, including – between 2008 and 2014 — Nasdaq OMX Armenia OJSC (“Nasdaq OMX”), which operated the Armenian Stock Exchange.  As part of its business, Nasdaq OMX invoiced and received fee payments from banks that participated in foreign exchange and credit transactions between counterparties, although the transactions did not themselves take place on platforms operated by Nasdaq OMX.  According to OFAC, some of these fees were paid by Mellat Bank SB CJSC (“Mellat Armenia”), which, along with its parent organization, Bank Mellat, was first designated by OFAC in 2007 pursuant to Executive Order 13382, removed from the Specially Designated Nationals and Blocked Persons List for several years, and reinstated in October 2018 pursuant to Executive Order 13224 when the United States withdrew from the Joint Comprehensive Plan of Action with Iran (“JCPOA”).

As detailed in OFAC’s enforcement release, Nasdaq OMX Armenia and Nasdaq itself appear not to have properly understood the sanctions implications of Mellat Armenia’s participation in the foreign exchange and credit resource transactions.  Only in 2014 did Nasdaq identify the sanctions compliance issues potentially raised by Mellat Armenia’s participation in the platforms owned and operated by Nasdaq OMX Armenia.  It disclosed the apparent violations to OFAC and subsequently wound down its ownership interest in the Armenian Stock Exchange.

OFAC assessed the value of Nasdaq OMX’s 151 apparent violations of the Iranian Transactions and Sanctions Regulations (“ITSR”) to be $227,915,023.  It deemed Nasdaq liable for these apparent violations because, under 31 CFR § 560.701(a)(4), civil penalties may be imposed on a US person if foreign entities it owns or controls engage in conduct proscribed by the ITSR.

In determining the appropriate penalty amount, OFAC took into consideration aggravating factors such as Nasdaq’s failure to exercise due caution, the size and sophistication of the Nasdaq organization, and Nasdaq OMX’s actual knowledge that Mellat Armenia was trading on the Armenian exchange.  OFAC also took into account important mitigating factors, such as the company’s violation-free record over the preceding five years; its fulsome cooperation and voluntary self-disclosure to OFAC; its agreement to toll the statute of limitations; the company’s eligibility, upon subsequent application, for a license permitting some further involvement with Mellat Armenia, and; remedial measures taken by Nasdaq to remedy the deficiencies.  Altogether, OFAC deemed the apparent violations to be non-egregious, and elected to impose a penalty of $4,040,923.

Enforcement release