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BofA settles federal claims over drug-trafficking sanctions

Bank of America has agreed to a settlement with the U.S. Treasury Department over claims it may have processed transactions for foreign drug traffickers from 2005 to 2009 in violation of sanctions.

The $16.6 million settlement announced Thursday releases the Charlotte bank from any civil liabilities associated with the apparent violations, according to the agreement with Treasury’s Office of Foreign Assets Control.

In reaching the settlement, Bank of America did not admit or deny the allegations. There were no findings of fault, the settlement said.

“This concludes a matter we addressed in 2009 by enhancing our sanctions-related systems and controls,” Bank of America spokesman Lawrence Grayson told the Observer.

The bank was suspected of processing 208 transactions totaling about $91,192 on behalf of 10 people on the Office of Foreign Assets Control’s blacklist between September 2005 and March 2009.

Also during that time, the bank apparently failed to block five accounts owned by the traffickers, according to the Treasury.

The bank “demonstrated reckless disregard” for U.S. sanctions by failing to adequately address a known deficiency in its screening tool, according to a Treasury notice. The deficiency prevented the bank from identifying potential matches to names on the blacklist, the notice says.

Although the bank disclosed most of the apparent violations to the Office of Foreign Assets Control, they did not qualify as voluntary self-disclosures because they were substantially similar to apparent violations the office was already aware of.

According to the Treasury notice, the base penalty for the apparent violations was $83.7 million. The notice says the penalty was reduced for various reasons, including that the bank corrected the deficiency in its screening tool.

Banks are required to freeze the assets within U.S. jurisdiction of drug traffickers included on a sanctions list. U.S. individuals and entities are banned from doing business with those on the list, meaning financial institutions are not allowed to process their transactions.

The settlement follows inquiries by the government into other banks accused of violating U.S. sanctions. In June, French bank BNP Paribas agreed to plead guilty and pay an $8.9 billion penalty for illegally processing transactions for countries subject to U.S. sanctions.

Other Charlotte banks have agreed to fines stemming from probes into activities involving drug money. In 2010, Wells Fargo’s Wachovia unit agreed to pay $160 million to resolve a criminal investigation into whether it allowed drug money to be laundered through Mexican exchange houses.

Roberts: 704-358-5248; Twitter: @DeonERoberts
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