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Union de Banques Arabes et Françaises (UBAF), a French bank specialising in trade finance, has agreed to pay US$8.5mn to settle allegations of sanctions breaches brought by US federal regulators.

According to the Office of Foreign Assets Control (OFAC) – an authority that sits within the US Treasury Department – the bank processed 127 transactions on behalf of Syrian financial institutions between August 2011 and April 2013, carrying a total value of more than US$2bn.

In doing so, OFAC says the bank “demonstrated a reckless disregard for its US sanctions compliance obligations when it continued to provide USD services to sanctioned Syrian parties after the August 2011 expansion of US sanctions on Syria”.

Those sanctions were introduced by then-President Barack Obama in response to the Syrian regime’s “violence and repression” against anti-government protestors. The previous month, Syrian tanks had stormed several cities and killed an estimated 136 people, prompting international outrage.

13 of the transactions subject to this week’s enforcement action relate to letters of credit (LCs) issued or confirmed by UBAF, which is headquartered in Paris but specialises in financing trade between Europe and the Middle East, North Africa, Sub-Saharan Africa and Asia.

In some cases, OFAC says the bank handled import or export “back-to-back” LCs that did not involve dollar clearing, but involved an intermediary whose LCs were dollar-denominated. In others, UBAF issued or confirmed LCs that did involve dollar clearing.

The remaining 114 transactions were internal transfers. 45 were dollar payments carried out on the bank’s own books, but that the authority says were in reality being conducted on behalf of a Syrian entity listed by OFAC as a sanctioned entity.

The remaining 69 were foreign exchange transactions involving a sanctioned Syrian customer, whereby UBAF would debit that customer’s account in one currency and credit its account in another currency, before conducting a US dollar-cleared transaction with the other party in the trade.

According to the regulator, the bank was aware of the sanctions regime targeting Syrian companies. However, it “incorrectly believed that avoiding direct USD clearing on behalf of sanctioned parties was sufficient”.

“Thus, the bank acted recklessly by failing to exercise a minimal degree of caution or care in accounting for the risks associated with continuing to provide USD-based services to OFAC-sanctioned parties,” it says.

Other aggravating factors were that UBAF management “had actual knowledge of the conduct giving rise to the apparent violations”, and that the bank “conferred significant economic benefit” to sanctioned entities.

Though the maximum statutory penalty is over US$4bn, the authority says the case is “non-egregious” and so the base fine applicable is US$15.9mn.

That was ultimately reduced to just over US$8.5mn, as the bank voluntarily disclosed the breaches, cooperated with OFAC’s investigation, had no record of other violations and had since significantly improved its compliance programme.

The action closely follows another OFAC enforcement action against a bank involved in Middle Eastern trade.

National Commercial Bank, headquartered in Jeddah, Saudi Arabia, agreed to pay US$650,000 in late December after processing 13 US dollar-denominated transactions supporting goods or services linked to Syria and Sudan.

The violations took place between 2011 and 2014 and carried a total value of US$5.9mn, the authority says, though adds that the bank later “started to implement more robust compliance measures”.

Trade finance banks have long been on alert over the US’ fearsome secondary sanctions regime, which empowers authorities to take action against financial institutions even if they have no US presence.

Evelyn Sheehan, a lawyer at Kobre & Kim and a former Department of Justice prosecutor, says the NBC settlement “is not particularly remarkable from a legal perspective, but rather a good example of ‘bread and butter’ sanctions enforcement by OFAC”.

“OFAC has signalled consistently through statements and enforcement actions that transactions like those at issue that ‘transited through the US financial system’ – typically through US dollar denominated correspondent bank accounts – are subject to US sanctions,” she tells GTR.

As of press time, neither bank had issued a statement in response to the enforcement actions, and neither commented when contacted by GTR.