By: John Black
(Editor’s Note: That is perhaps one of the most attention grabbing export control headlines ever.)
On December 10, 2012 the Office of Foreign Assets Control (OFAC) in the US Treasury Department announced a $132 million settlement agreement with Standard Chartered Bank (SCB) to settle alleged violations of US trade embargoes and sanctions. The $132 million OFAC settlement is part of a combined global settlement of $327 million with federal and local government partners. The settlement is related to alleged violations by the London and Dubai offices of SCB of a number of U.S trade embargoes and sanctions programs, including those relating to Iran, Burma, Libya and Sudan and the Foreign Narcotics Kingpin Sanctions Regulations.
“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 J. Szubin. “We remain committed to working with our partners in the regulatory and law enforcement community to ensure that the U.S. financial systems are protected from the risks associated with this type of illicit financial behavior.”
According to OFAC, from 2001 to 2007, SCB’s London head office and its Dubai branch engaged in stripping practices that interfered with the implementation of U.S. economic sanctions by financial institutions in the United States, including SCB’s New York branch. In London, those practices included omitting or removing references to US-sanctioned locations or entities from payment messages sent to U.S. financial institutions. SCB replaced 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 US financial institutions that falsely referenced SCB as the ordering institution. In Dubai, the practices included sending payment messages to or through the United States without references to locations or entities that the US banks would have spotted as creating US sanctions issues. 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.
In addition, SCB’s New York branch settled charges related to eight apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations (FNKSR).
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. SCB is also required to provide OFAC with copies of submissions to the Board of Governors of the Federal Reserve System (Board of Governors) relating to the OFAC compliance review that it will be conducting as part of its settlement with the Board of Governors.