Bank Client List Includes Foreign Countries Banned Under U.S. Sanctions Program
Manhattan District Attorney Cyrus R. Vance, Jr., today announced with Assistant Attorney General Lanny A. Breuer of the Criminal Division of the U.S. Department of Justice (DOJ) the resolution of a joint investigation into the criminal conduct of BARCLAYS PLC (BARCLAYS), a United Kingdom bank, and the payment of $298 million in penalties and forfeiture to resolve the matter. In the Deferred Prosecution Agreement, BARCLAYS admitted violating New York State law by falsifying the records of New York financial institutions. The scheme enabled BARCLAYS’ Cuban, Sudanese, Iranian, Burmese, Libyan and other sanctioned clients to access the U.S. financial system in violation of U.S. sanctions. From 2000 through the end of 2006, BARCLAYS transferred approximately $500 million in violation of U.S. sanctions by deceiving U.S. banks into processing illegal wire payments.
“Criminal activity of the type we found at Barclays does more than deceive our financial institutions, it threatens the security of our country,” said District Attorney Cyrus R. Vance Jr. “The Manhattan District Attorney’s Office has been a leader in these investigations, and I am committed to continuing our work with federal law enforcement agencies in this arena.”
“Banks like Barclays will not be permitted to disregard sanctions put in place by the U.S. government,” said Assistant Attorney General Lanny A. Breuer of the Criminal Division of DOJ. “Not just once, but numerous times over more than a decade, Barclays stripped vital information out of payment messages that would have alerted U.S. financial institutions about the true origins of the funds. This serious conduct has now resulted in a serious sanction – forfeiture of $298 million, a public admission of its illegal acts, and the implementation of stringent compliance measures. As I’ve said repeatedly, when corporations self-disclose their criminal wrongdoing to us, as Barclays did, they will not get a pass, but we will take their disclosure, cooperation and remedial efforts into consideration.”
“Barclays implemented practices designed to evade U.S. sanctions for the benefit of sanctioned countries and persons,” said Adam J. Szubin, Director of The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury. “The substantial economic benefit to sanctioned parties and the systemic nature of the apparent violations could have resulted in a much more onerous OFAC fine had Barclays not voluntarily self-disclosed and had it not cooperated with OFAC throughout the investigation. This is the first settlement of this magnitude where OFAC determined that all of the apparent violations were voluntarily self-disclosed by the bank.”
Pursuant to the Deferred Prosecution Agreements, BARCLAYS has agreed to adhere to best practices for international banking transparency, complete an internal review of past transactions, cooperate with ongoing law enforcement investigations, and pay $298 million in penalties and forfeiture. Half of that amount, $149 million, will be paid to the District Attorney’s Office and then distributed pursuant to New York State law. The other half will be paid to the United States.
District Attorney Vance said that the investigation lasted nearly three years and was conducted jointly with DOJ’s Asset Forfeiture and Money Laundering Section. District Attorney Vance also recognized the substantial contributions of OFAC and the Federal Reserve Bank of New York, acting in both a supervisory and investigative role, and the New York State Banking Department.
The U.S. government restricts certain countries, including Iran, Sudan, Cuba, Burma, as well as entities and individuals from those countries, from accessing the U.S. banking system. OFAC is charged with administering these economic sanctions against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. Sanctioned financial institutions, countries, and individuals are generally prohibited from accessing the U.S. financial system.
Banks in Manhattan that process most of the world’s U.S. dollar payments use sophisticated computer systems, commonly known as “OFAC filters,” to prevent sanctioned entities, as well as terrorists, money launderers, and other criminals, from gaining access to the U.S. banking system. These OFAC filters act as the first line of defense to protect the integrity of the U.S. financial system. BARCLAYS helped its sanctioned clients, predominantly from Cuba and Sudan, evade the U.S. banks’ OFAC filters and gain access to the U.S. financial system.
Beginning in the mid-1990s and lasting through 2006, BARCLAYS moved hundreds of millions of dollars illegally through banks in Manhattan on behalf of clients subject to U.S. sanctions. BARCLAYS moved this money by: (a) following instructions, principally from banks from Sudan, Cuba, Iran, Libya, and Burma, not to mention their names in U.S. dollar payment messages sent to BARCLAYS’ branch in New York and to other financial institutions located in the United States; (b) routing U.S. dollar payments through an internal BARCLAYS account to hide the payments’ connection to sanctioned entities; (c) amending and reformatting U.S. dollar payment messages to remove information identifying sanctioned entities; and (d) deliberately using a less transparent method of payment messages, known as cover payments.
District Attorney Vance emphasized that pursuant to office policy, prosecutors expect corporations to recognize their misconduct and to cooperate with criminal investigations. While today’s Deferred Prosecution Agreement was designed to impose a substantial punishment on BARCLAYS and to send a strong message of deterrence to other banks, there were important mitigating factors that led to the agreement to defer prosecution. Those factors included the fact that BARCLAYS fully cooperated throughout the investigation and devoted significant resources to both its internal investigation and the investigation conducted by the District Attorney’s Office and DOJ. BARCLAYS also fully acknowledged and accepted responsibility for its conduct, and has been extremely cooperative since the commencement of the investigation. Furthermore, BARCLAYS exited the sanctioned entity clearing business voluntarily before being contacted by the District Attorney’s Office.
District Attorney Vance thanked Assistant District Attorneys Richard T. Preiss, Senior Investigative Counsel, and Aaron T. Wolfson of the Major Economic Crimes Bureau, which is headed by Bureau Chief Richard Weber, as well as Investigative Analysts Sarah Schoknecht, Aaron Davidowitz, and Samantha Gillespie. The investigation was supervised by Principal Deputy Bureau Chief Gary T. Fishman of the Major Economic Crimes Bureau and Investigation Division Chief Adam Kaufmann.
District Attorney Vance recognized and thanked the following agencies and individuals for their assistance in the investigation: Assistant Attorney General Lanny A. Breuer, Criminal Division, U.S. Department of Justice; Stuart A. Levey, Under Secretary of the Treasury for Terrorism and Financial Intelligence, U.S. Department of the Treasury; the prosecutors and investigators assigned to the U.S. Department of Justice, Asset Forfeiture and Money Laundering Section, including Senior Trial Attorney Frederick Reynolds, Trial Attorney Kevin Gerrity and Jeremy Wade, Senior Investigator Laurie Bender, and Acting Deputy Chief Mia Levine; the Federal Bureau of Investigation; the Internal Revenue Service, Criminal Investigation Division; the Federal Reserve Bank of New York’s Deputy Chief Investigator Sean O’Malley, Vice President Yoon Hi Green, Senior Vice President Shari Leventhal, and General Counsel Thomas Baxter; the U.S. Department of the Treasury’s Office of Foreign Assets Control Director Adam Szubin, Assistant Director for Compliance, Outreach & Implementation Dennis Wood, Senior Compliance Review Coordinator Jonathan Thomas, and Compliance Officer Michael Dondarski; and the New York State Banking Department’s Criminal Investigations Bureau Director Ricardo Velez and Senior Bank Examiner Dorota Kaszuba.