Denied Party Digest

Valuable information about denied party screening

The Department of Treasury, Office of Foreign Assets Control (OFAC) recently announced a settlement with Atradius Trade Credit Insurance, Inc. (ATCI) for dealings in the debt of Grupo Wisa, S.A., a party on the SDN list:

On May 5, 2016, OFAC designated Grupo Wisa, S.A. (Grupo Wisa) and the Soho Mall Panama pursuant to the Foreign Narcotics Kingpin Designation Act, 21 U.S.C. §§ 1901-1908 (Kingpin Act) and added the entities to the List of Specially Designated Nationals and Blocked Persons (SDN List).

On October 19, 2016, approximately five months after Grupo Wisa’s designation, a cosmetics company located in the United States assigned to ATCI the right to collect on a $5,730,680.33 debt owed by Grupo Wisa. ATCI subsequently filed a claim in Panama as a creditor in the liquidation of Grupo Wisa, and on June 20, 2017, ATCI received a payment of $4,043,174.25 from the liquidation of Grupo Wisa’s assets in Panama. By accepting the assignment of the Grupo Wisa debt, and by receiving the payment from the Grupo Wisa liquidation, ATCI appears to have dealt in property or interests in property of a specially designated narcotics trafficker in violation of 31 C.F.R. § 598.203(a).

It is not clear from the announcement whether ATCI did not conduct sufficient screening or simply believed that the SDN listing did not apply to its transaction.  OFAC considered as an aggravating factor that:

ATCI did not undertake any meaningful analysis or otherwise seek confirmation from OFAC that assignment of the SDN’s debt and acceptance of payment from the Soho Mall Trust was permissible under existing authorizations; and ATCI is a subsidiary of a sophisticated global trade credit insurance and collections conglomerate.

This case highlights both the importance of screening and analyzing whether a screening hit prohibits a transaction.

Click here for the full settlement announcement.