The U.S. Treasury, and various other U.S. authorities, have settled with British bank Standard Chartered over allegations that the bank violated financial sanctions in transactions involving Iran, Burma, Libya and Sudan.
The Department of the Treasury’s Office of Foreign Assets Control (OFAC) Monday announced a US$132 million agreement with Standard Chartered Bank (SCB) to settle its potential liability for apparent violations of U.S. sanctions. The deal represents part of a combined US$327 million settlement with other federal and local authorities (including U.S. Attorney’s Office for the District of Columbia, the Department of Justice’s National Security Division, the Department of Justice’s Asset Forfeiture and Money Laundering Section and the New York County District Attorney’s Office; and, the Board of Governors of the U.S. Federal Reserve Board).
“Today’s settlement is the result of an exhaustive interagency investigation into Standard Chartered Bank’s attempts to violate U.S. sanctions programs through the ‘stripping’ from payment messages of critical information,” said OFAC director, Adam Szubin.
The settlement resolves the OFAC’s investigation into apparent violations by the London and Dubai offices of SCB of a number of U.S sanctions programs, including those relating to Iran, Burma, Libya and Sudan. It says that, from 2001 to 2007, SCB’s London head office and its Dubai branch engaged in payment practices that interfered with the implementation of U.S. economic sanctions by financial institutions in the U.S., including SCB’s New York branch.
“In London, those practices included omitting or removing material references to U.S.-sanctioned locations or entities from payment messages sent to U.S. financial institutions. SCB accomplished this by replacing the names of ordering customers on payment messages with special characters, effectively obscuring the true originator and sanctioned party in the transaction; and forwarding payment messages to U.S. financial institutions that falsely referenced SCB as the ordering institution,” it says. As a result, millions of dollars of payments were routed through U.S. banks for or on behalf of sanctioned parties in apparent violation of U.S. sanctions, Treasury notes.
Under the settlement agreement, SCB is required to put in place and maintain policies and procedures to minimize the risk of the recurrence of such conduct in the future. It is also required to provide the OFAC with copies of a compliance review that it will be conducting as part of its settlement with the Fed.
“We remain committed to working with our partners in the regulatory and law enforcement community to ensure that the U.S. financial system is protected from the risks associated with this type of illicit financial behavior,” added Szubin.
Back in August, the bank settled allegations by the New York State Department of Financial Services (DFS) in a deal that included a payment of US$ 340 million, over allegations that it facilitated transactions that violated U.S. sanctions against Iran.
Standard Chartered said Monday that the “settlements are the product of an extensive internal investigation that led the bank voluntarily to report its findings concerning past sanctions compliance to these U.S. authorities, and nearly three years of intensive cooperation with regulators and prosecutors.”
The bank says that the US$327 million penalty, which is for past violations of sanctions laws and the lack of transparency in connection with payment practices that were terminated in 2007, will be paid in the second half of 2012.
It also says that it ceased its Iranian US dollar payments business in late 2006 and in the following year stopped transacting any new business with Iranian entities; and that it has since completed a comprehensive review and upgrade of its compliance systems and procedures, including the strengthening of sanctions and customer due-diligence screening systems, the addition of New York-based sanctions-compliance and financial-crime reporting staff, the hiring of an independent consultant to assess its anti-money laundering program, and establishing testing, audit and quality assurances policies and procedures.