The Treasury Department’s Office of Foreign Assets Control announced a resolution with New York-based stock exchange operator Nasdaq Friday for violations of sanctions against Iran. Nasdaq agreed to pay $4 million in penalties for the resolution.

The violations occurred through Nasdaq’s former Armenian subsidiary that provided services to Iran’s state-owned Bank Mellat.

Nasdaq acquired the Armenian Stock Exchange in 2008 as part of the acquisition of Swedish financial services company OMX AB. Nasdaq renamed the unit Nasdaq OMX Armenia.

Nasdaq OMX Armenia operated platforms that allowed foreign exchange trading and related services among Armenian banks. The platforms processed trades and settled payments involving Bank Mellat, according to OFAC’s allegations, leading to 51 sanctions violations.

Beginning in 2012, the United States banned direct or indirect transactions between companies under U.S. control and the government of Iran.

Nasdaq’s “Global International Business Conduct Policy” in effect as of October 1, 2012 covering all employees at affiliates and foreign units included the Iran sanctions and named the Iranian government’s Bank Mellat as a sanction target.

But OFAC said,

Neither Nasdaq nor Nasdaq OMX Armenia, however, appears to have taken steps to update or apply its sanctions compliance policies to Nasdaq OMX Armenia’s conduct with respect to Mellat Armenia once Nasdaq OMX Armenia became prohibited from providing services to Iran or the Government of Iran . . .

According to OFAC, a July 2012 internal Nasdaq risk assessment questionnaire noted that Mellat Armenia was a participant on the Armenian Stock Exchange and confirmed the Government of Iran’s ownership of Mellat Armenia through Bank Mellat.

Another questionnaire identifying Mellat Armenia was submitted to Nasdaq’s Risk Management division in Stockholm in 2013 and forwarded to Nasdaq compliance and legal personnel in the United States, OFAC said.

[T]hese personnel, however, did not appear to sufficiently understand the implications of the reference to Mellat Armenia, and Nasdaq OMX Armenia continued to provide credit resource and foreign exchange services until 2014 when Nasdaq submitted an initial notice of voluntary self-disclosure to OFAC.

After Nasdaq’s disclosure to OFAC, Nasdaq wound down its ownership interest in Nasdaq OMX Armenia.

Nasdaq earned about $16,000 in commissions and fees from the Armenia unit during the time when the sanctions violations happened.

OFAC said Nasdaq and Nasdaq OMX Armenia “failed to exercise due caution or care with regard to the conduct” involving Mellat Armenia despite having “actual knowledge” that Mellat Armenia was trading on the platforms, and “did not take steps to put appropriate sanctions compliance-related controls into place” after Nasdaq OMX Armenia became subject to the Iran sanctions in 2012.

OFAC said Nasdaq cooperated fully and agreed to toll the statute of limitations.

It also “undertook remedial measures to address its sanctions compliance deficiencies, including divesting its ownership stake in Nasdaq OMX Armenia, creating a dedicated sanctions working group, implementing a new training program, enhancing its screening software, and conducting assessments of its compliance programs.”

Source » fcpablog