Minor Lapses Leading to Major Oversights: The Story of Nasdaq's Failure to Follow Up
On December 12, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a settlement with Nasdaq, Inc. Nasdaq agreed to remit $4,040,923 to settle its potential civil liability for a former wholly-owned foreign subsidiary’s apparent violations of sanctions on Iran.
What happened to Nasdaq could make even the most seasoned Wall Street veterans raise their eyebrows in surprise.
The Story, Shortened:
Nasdaq, the titan of stock exchanges, ventured into new territories by acquiring a Swedish company with trading platforms in Armenia. These platforms catered to various banks, including the Armenian branch of Iran’s Bank Mellat.
Here's where things get tricky. Four years post-acquisition, the U.S. imposed sanctions on Iranian government entities, including Bank Mellat. But Nasdaq, seemingly in a parallel universe, continued its business as usual with the Armenian bank.
The Twist:
Now, before you jump to conclusions about greed-driven motives, here's a twist: the Armenian platforms contributed a mere $16,000 in commissions and fees during the period of these violations. That's pocket change in the financial world. So, it wasn't about the money.
And ignorance? Hardly. Nasdaq wasn't some backwater operation unaware of international protocols. Their polished global business conduct policy and internal risk assessments were proof of their compliance savvy.
So, what went wrong?
The most plausible explanation lies in a lack of follow-up. In a vast organization like Nasdaq, where processes and policies are deeply entrenched, there's a tendency to assume that once directives are set, they will be followed to the letter. However, without regular checks and confirmations, even the most well-intentioned plans can go off course.
The Nasdaq incident highlights an often-overlooked aspect of corporate governance: the importance of continuous oversight. In a complex, fast-paced environment, it's not enough to set up systems and assume they'll run flawlessly. Regular monitoring and verification are essential to ensure that every cog in the machine functions as intended.
This episode underscores the necessity of not just establishing compliance frameworks but actively ensuring their effective implementation at every level. In the world of finance, it's often the smallest lapses that lead to the most significant oversights
