OFAC settles with Nasdaq, Inc., for $4,040,923 for apparent violations
Nasdaq, Inc., which owns and operates stock exchanges and other businesses worldwide, agreed to pay $4,040,923 to settle its potential civil liability for the conduct of its former wholly owned foreign subsidiary, Nasdaq OMX Armenia OJSC (Nasdaq OMX Armenia), the former owner and operator of the Armenian Stock Exchange (ASE). In this capacity, Nasdaq OMX Armenia processed trades and settled payments through the ASE platform involving the OFAC-designated Armenian subsidiary of Iran’s state-owned Bank Mellat. In doing so, Nasdaq OMX Armenia knowingly engaged in the exportation of services to Iran and the Government of Iran, thereby committing 151 apparent violations of OFAC sanctions on Iran. The settlement amount reflects OFAC’s determination that the apparent violations were non-egregious and voluntarily self-disclosed. [On October 25, 2007, OFAC added Mellat Armenia to the list of Specially Designated Nationals and Blocked Persons (SDN List) pursuant to Executive Order 13382 of June 28, 2005, Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters. Nasdaq OMX Armenia became prohibited from providing services to Iran or the Government of Iran on October 9, 2012, with the restrictions effective on December 26, 2012.]
Nasdaq OMX Armenia knew that Mellat Armenia was among the 35 ASE member financial institutions while operating the credit resource and foreign exchange platforms. Nasdaq OMX Armenia’s web page identified Mellat Armenia as a market participant on the ASE’s credit resources and foreign exchange market and listed Mellat Armenia’s trading name, address, and contact information. Moreover, Nasdaq OMX Armenia’s fee assessments required monthly analyses of the trades in which the Iranian-owned bank had participated on the ASE.
However, during the period in which Nasdaq OMX Armenia provided services to the Armenian banking sector, it appears neither Nasdaq OMX Armenia nor Nasdaq properly understood the sanctions implications of Mellat Armenia’s participation on the platforms that Nasdaq OMX Armenia owned and operated. This lack of understanding continued until September 2014, when Nasdaq identified the sanctions compliance implications of Mellat Armenia’s participation on the platforms that Nasdaq OMX Armenia owned and operated.
Nasdaq’s October 1, 2012 “Global International Business Conduct Policy,” for example, outlined Nasdaq’s worldwide policy of compliance with trade laws and regulations governing its international business activities. The policy explicitly stated that it was applicable to all employees of Nasdaq, “including the employees of its subsidiaries and to anyone working on behalf of Nasdaq including its consultants, agents, affiliates, partners, and intermediaries.” The policy included a section specifically addressing economic sanctions laws and regulations, which required that all Nasdaq employees contact Nasdaq’s Office of General Counsel prior to engaging in activities involving a list of countries subject to U.S. sanctions, including Iran, or persons on OFAC’s SDN List, such as Mellat Armenia.
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 on October 9, 2012, with the restrictions effective on December 26, 2012. In July 2012, a Nasdaq risk assessment questionnaire noted that Mellat Armenia was a participant on the ASE, which Nasdaq OMX Armenia confirmed. Nasdaq OMX Armenia further noted that Mellat Armenia was owned by Bank Mellat, which was an Iranian state-owned entity. Nasdaq took no action in response. Subsequently, in 2013, an additional questionnaire identifying Mellat Armenia as a market participant was submitted to Nasdaq’s Risk Management division in Stockholm and forwarded to Nasdaq compliance and legal personnel in the United States; these 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 voluntarily disclosing the apparent violations to OFAC, Nasdaq subsequently wound down its ownership interest in the ASE. Nasdaq OMX Armenia earned approximately $16,000 in commissions and fees over the relevant period from processing the transactions at issue.
As a result of its provision of services to Mellat Armenia, Nasdaq OMX Armenia engaged in 151 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. § 560.215, between December 28, 2012, and September 3, 2014, with a total face value of $227,915,023 (the “Apparent Violations”). Under 31 C.F.R. § 560.701(a)(4), a U.S. person is subject to civil penalties if foreign entities it owns or controls engage in conduct that 31 C.F.R. § 560.215 proscribes. Because Nasdaq OMX Armenia's activities would be prohibited for U.S. persons, Nasdaq is liable for the Apparent Violations of its former foreign subsidiary, Nasdaq OMX Armenia.