US fines firm that conducts CBI due diligence for Iran sanctions violations

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By Kenneth Rijock

MIAMI, USA — In responding to complaints that their economic citizenship programs allow high-risk individuals to obtain passports from a low-risk jurisdictions, proponents often point to the quality of due diligence that outside companies conduct on the applicants, especially in the five countries of the East Caribbean known for their citizenship by investment (CBI) programs.

A civil penalty recently levied by the Office of Foreign Assets Control (OFAC) could be a sign that these firms and their services may not be as effective as promoted.

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IPSA International Services Inc., a US-based "global business investigative and regulatory risk mitigation firm”, has agreed to pay $259,200, to settle what OFAC describes as apparent violations of Iran sanctions regulations. The transactions cited totalled $290,784.

IPSA, which conducted due diligence investigations for an unnamed country’s citizenship by investment program, when faced with vetting Iranian nationals, engaged its Dubai subsidiary to perform the tasks. That subsidiary in turn hired local background investigation contractors, working inside Iran, to obtain the information, and forward it to the US parent company, which used it in its due diligence investigations. The Iran-based contractors were thereafter paid by the Dubai subsidiary.

OFAC found that IPSA’s compliance program was ineffective, with respect to the risks of the company doing business with Iran-origin background investigation services.

The civil penalty also confirms that a large number of Iranian nationals are seeking to acquire citizenship, and passports, from low-risk countries located far from conflict zones. However, the Iran-based background investigators are in a jurisdiction where they cannot be disciplined, for negligence, or even intentional misinformation.

Kenneth Rijock is a banking lawyer turned-career money launderer (10 years), turned-compliance officer specialising in enhanced due diligence, and a financial crime consultant who publishes a Financial Crime Blog. The Laundry Man, his autobiography, was published in the UK on 5 July 2012.

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