US sanctions enforcement penalties reach $1.28bn in the first half of 2019

The record volume, which tops penalties for the whole of 2018, is partly due to increased US scrutiny on Iran

London-headquartered Standard Chartered reached a $639m agreement with the Treasury Department on apparent violations of its sanctions. AFP

US sanctions enforcement penalties for the first six months of 2019 have reached $1.28 billion, exceeding 2018's full-year peak, according to a study published by global law firm Linklaters.

A significant percentage of the enforcement relates in whole or part to Iran, whose economy has become increasingly embargoed by the US since last year.

Around 98.7 per cent of all of the US Treasury Department's Office of Foreign Assets Control's (OFAC) penalties since 2017 include an Iran component, added the law firm.

“Avoiding risk associated with US economic sanctions has become increasingly important for clients navigating global transactions. This year we’ve seen record high penalties from OFAC enforcement actions - and it is only the middle of the year. This clearly demonstrates the seriousness with which the United States takes these matters," said Doug Davison, a US regulatory enforcement partner at Linklaters.

The White House under President Donald Trump walked away from the Iran nuclear deal in May 2018, enforcing strict sanctions on Tehran's ability to sell crude and condensate in the international markets. The Obama administration was party to the Joint Comprehensive Plan of Action (JCPOA) signed in 2016, which enabled Iran to access the international and financial markets in return for strict controls on its nuclear programme.

However, Mr Trump had felt the deal had been too lenient on Tehran and had as part of his campaign vowed to walk away from the JCPOA.

Amid ongoing tensions with Iran, which the US has blamed for a spate of tanker attacks in the Gulf since May, Washington also imposed sanctions against the country's Supreme Leader Ayatollah Ali Khamenei earlier this month.

The higher volumes accrued so far this year by OFAC relate to two record penalties, each worth more than $600 million, with each targeting a major non-US bank, according to Linklaters.

OFAC took action against Italy's UniCredit Group of banks for violating a number of US sanctions provisions relating to "weapons of mass destruction proliferation, global terrorism" in Burma, Cuba, Iran, Libya, Sudan, and Syria.

The Treasury Department also reached a $639m agreement with London-headquartered Standard Chartered Bank relating to apparent violations of its sanctions provisions relating to Burma, Cuba, Iran, Sudan as well as Syria.

The banking giant was charged with processing 9,335 transactions totaling $437m processed to or through the US that involved the countries under sanctions between June 2009 and May 2014. Twenty-five out of the 41 cases processed since 2017 relate to Iran, noted Linklaters.

Russia also came under the purview of enforcement by OFAC earlier this year. The office levied a $75,375 penalty on an American software company that accepted invoice payments from a sanctioned Russian oil company. The US is also considering fresh sanctions against Russia for its continued support for the government of Venezuelan President Nicolas Maduro, the White House said on Thursday.

Financial companies, especially global banks that deal with high volumes of transactions involving entities around the world, remain the most penalised since 2018, accounting for 98 per cent of total OFAC penalties in the last 18 months, observed Linklaters.