On June 20, 2023, the Office of Foreign Assets Control of the US Department of the Treasury announced a settlement with Swedbank Latvia AS, resolving the bank’s potential civil liability for 386 apparent violations of US sanctions. Swedbank Latvia, headquartered in Riga, Latvia, is a subsidiary of Swedbank AB (publ), a full service financial institution based in Stockholm.
According to the Enforcement Release, a shipping industry customer in Crimea, onboarded by Swedbank Latvia prior to Russia’s 2014 invasion of Crimea, initiated 386 transactions that were processed through US correspondent banks between February 5, 2015 and October 14, 2016 – after the invasion of Crimea and after sanctions were imposed. When one US bank rejected the payments due to the potential connection with Crimea, Swedbank Latvia inquired with its client and was assured that none of the transactions involved Crimea, although this was false; according to OFAC, Swedbank Latvia had reason to know that the client and its associated companies had a physical presence in Crimea. OFAC found that Swedbank Latvia’s conduct constituted the export of financial services to Crimea in violation of Executive Order 13685(1)(a)(iii).
The total value of the transactions at issue is $3,312,120. On the one hand, OFAC noted that Swedbank Latvia did not voluntarily self-disclose the apparent violations; on the other hand, the apparent violations constitute a non-egregious case, resulting in a base civil monetary penalty of $6,238,000. In determining the settlement amount of $3,430,900 – approximately 55% of the base penalty amount – OFAC took into consideration aggravating factors such as Swedbank Latvia’s failure to exercise due caution regarding its clients presence in Crimea, the sophisticated nature and size of Swedbank Latvia’s operations, and the bank’s knowledge that it had customers in Crimea and could be processing payments for clients located there. At the same time, OFAC took into account mitigating factors such as Swedbank Latvia’s clean record of violations for the five preceding years, and the remedial action taken by the bank in response to the apparent violations. These measures include “geofencing” to prevent customers from sending payments from IP addresses in sanctioned jurisdictions, enhanced due diligence and screening procedures for high-risk customers, and increasing compliance staff at the bank. In addition, Swedbank AB and Swedbank Latvia cooperated substantially in OFAC’s investigation.
In a press release announcing the settlement, Swedbank indicated that investigations by the US Department of Justice, the US Securities and Exchange Commission, and the Department of Financial Services of New York are ongoing.