BY JOSEPH A. MANN JR.
American anti-money-laundering officials racked up their biggest success to date when a British bank agreed to pay $350 million to the federal government and the Manhattan District Attorney's office earlier this year for violating federal and New York state laws.
The Lloyds penalty was a chilling reminder of the severe consequences facing violators of U.S. anti-money-laundering laws.
In this case, it was employees of the bank who found a way to avoid setting off alarms at U.S. banks, according to court documents.
Describing the Lloyds case at a recent conference in Hollywood organized by moneylaundering.com, Adam Kaufmann, bureau chief at the Manhattan District Attorney's Office, said his office began investigating Iran and Iranian banking about three years ago.
ALTERED TEXT
As the investigation unfolded, the DA's office and the Justice Department, working with the IRS and New York state banking officials, found that beginning in the mid-1990s, Lloyds' offices, primarily in the U.K., Tokyo and Dubai, altered the text of electronic messages that moved funds from banks in Iran and Sudan to Lloyds and then to correspondent banks in the U.S.
The alterations, called ''stripping,'' involved removing any references to Iran, Sudan or any other terms that might raise a red flag at U.S. banks. These actions by Lloyds bypassed money-laundering filters and violated the International Emergency Economic Powers Act, which bans exportation of services to Iran and Sudan without authorization. Lloyds also violated New York State penal law by falsifying business records, Kaufmann said.
U.S. financial institutions believed that the transfers originated at Lloyds, not at banks in Iran and Sudan, thus causing them to provide financial services that were banned.
DODGING FILTERS
In 2002, Lloyds sought to stop stripping transfer messages in its own offices and advised Iranian banks on how to format messages that would avoid filters established by the Treasury Department's Office of Foreign Assets Control, Kaufmann said.
Lloyds voluntarily terminated the Iranian transfers in 2004. Payments from Sudan were halted in 2007. Kaufmann noted that recipients of funds in the U.S. are still being investigated.
Between 2002 and 2005, transfers from Iranian banks through Lloyds that terminated in the U.S. totaled around $300 million, while Iranian transfers that entered the U.S. and then were sent to beneficiaries in other countries reached into the billions of dollars. Transfers from Sudanese banks between 2002 and 2007 totaled about $30 million.
DIFFERING OPINIONS
Why did Lloyds decide to engage in the deception? The Justice Department's Mia Levine, who prosecuted the case with Kaufmann, said apparently ''there was a difference of opinion within Lloyds as to whether the bank was subject to U.S. laws.'' Some bank employees responsible for administering Lloyds' anti-money-laundering program were concerned about the transfers from Iran and Sudan, but other employees weren't.
Ironically, some transfers from Iran to the U.S. are permissible, Levine added, but Lloyds didn't seek permission from U.S. authorities.
In announcing the settlement in January, the Justice Department and the Manhattan DA's office said Lloyds ''accepted and acknowledged responsibility for its criminal conduct'' and agreed to forfeit $350 million as part of deferred prosecution agreements. Lloyds has agreed to cooperate with law enforcement, fully comply with international anti-money-laundering standards and disclose information on past Iranian and Sudanese transactions.
If the bank complies with the terms, it won't be prosecuted.
Source: The Miami Herald
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