Two British-based banks have been slapped with huge settlement payments to resolve separate allegations involving an elaborate conspiracy to launder millions in illegal cash and another scheme to violate U.S. sanctions against Iran, Sudan, Libya and Burma.
HSBC, the British banking giant, agreed to pay $1.9 billion to settle a money-laundering probe by federal and state authorities in the United States, which had focused on the transfer of billions of dollars on behalf of nations like Iran, which are under international sanctions, and the transfer of money through the U.S. financial system from Mexican drug cartels.
The bank, Britain’s largest by market value, will pay $1.25 billion in forfeiture and $655 million in civil penalties under what is known as a deferred prosecution agreement. It is accused of violating the Bank Secrecy Act and the Trading With the Enemy Act.
The settlement was first reported by the Associated Press.
In July, the Senate Permanent Subcommittee on Investigations held a hearing on HSBC’s operation, concluding that the bank had used its U.S. bank as a "gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules."
Committee Chairman Sen. Carl Levin, Michigan Democrat, said that due to poor anti-money-laundering controls, HSBC’s U.S. division "exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions."
Standard Chartered Bank, the second London-based bank named in the settlements, agreed to forfeit $227 million as part of deferred prosecution agreements with federal and state authorities for illegally moving millions of dollars through the U.S. financial system on behalf of sanctioned Iranian, Sudanese, Libyan and Burmese entities.
Standard Chartered provided wholesale banking services through branch offices in this country, primarily U.S.-dollar clearing for international wire payments.
The Standard Chartered agreement was announced by U.S. Attorney for the District of Columbia Ronald C. Machen Jr., who said that when banks dodge U.S. sanctions laws, "They imperil our financial system and our national security."
"Today's agreement holds Standard Chartered Bank accountable for intentionally manipulating transactions to remove references to Iran, Sudan, and other sanctioned entities, and then further concealing these transactions through misrepresentations to U.S. regulators," he said. "This $227 million forfeiture should make clear that trying to skirt U.S. sanctions is bad for business."
Standard Chartered operates a branch in New York that provides wholesale banking services and also provides U.S.-dollar correspondent banking services for its branches in London and Dubai.
According to court documents, from 2001 through 2007, Standard Chartered violated U.S. and New York state laws by moving millions of dollars illegally through the U.S. financial system on behalf of Iranian, Sudanese, Libyan and Burmese entities subject to U.S. economic sanctions. The bank knowingly and willfully engaged in criminal conduct that, according to the documents, caused its branch in New York and unaffiliated U.S. financial institutions to process over $200 million in transactions that otherwise should have been rejected, blocked or stopped.
The court documents said Standard Chartered engaged in criminal conduct by, among other things, instructing a customer in a sanctioned country to represent itself using its London banking code in payment messages, replacing references to sanctioned entities in payment messages with special characters and deleting payment data that would have revealed the involvement of sanctioned entities and countries using wire payment methods that masked their involvement.
This conduct, the documents said, occurred in various business units at Standard Chartered locations around the world, primarily London and Dubai, with the knowledge and approval of senior corporate managers and the bank’s legal and compliance departments.
In addition to evading U.S. economic sanctions, court records show that Standard Chartered made misleading statements to regulators to further conceal its business with sanctioned countries.
Standard Chartered's agreement to forfeit $227 million will settle forfeiture claims by the Justice Department and New York state. In light of the bank’s remedial actions to date and its willingness to acknowledge responsibility for its actions, the Justice Department will recommend the dismissal of the information in 24 months, provided the bank fully cooperates with, and abides by, the terms of the deferred prosecution agreement.
"For years, Standard Chartered Bank deliberately violated U.S. laws governing transactions involving Sudan, Iran, and other countries subject to U.S. sanctions," said Assistant Attorney General Lanny A. Breuer, who heads the Justice Department’s Criminal Division. "The United States expects a minimum standard of behavior from all financial institutions that enjoy the benefits of the U.S. financial system. Standard Chartered’s conduct was flagrant and unacceptable."
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