ING Groep NV (INGA) agreed to pay $619 million to settle U.S. charges it falsified financial records to bypass sanctions on countries including Cuba and Iran, the largest such penalty against a bank.
ING Bank, a unit of Amsterdam-based ING Groep, admitted it moved billions of dollars through the financial system on behalf of Cuban and Iranian clients, violating U.S. sanctions by concealing the nature of the transactions and deceiving U.S. banks into processing illegal wire payments, Manhattan District Attorney Cyrus Vance Jr. and the U.S. Department of Justice said in a statement.
The penalty is the largest against a bank in connection with U.S. sanctions violations, surpassing the $536 million paid by Zurich-based Credit Suisse AG (CSGN) in 2009 to settle similar violations, U.S. and New York officials said.
The ING agreement is part of a four-year investigation of “stripping,” in which codes indicating the source of wire transfers are removed. Vance said his office has secured $1.8 billion in settlements since 2009. London-based Lloyds Banking Group Plc (LLOY) paid $350 million and Barclays Plc (BARC) paid $298 million in agreements reached earlier in the probe into 10 banks that was begun by former District Attorney Robert Morgenthau.
“These cases give teeth to sanctions enforcement, send a strong message about the need for transparency in international banking, and ultimately contribute to the fight against money laundering and terror financing,” Vance said.
ING Bank moved more than $2 billion illegally through the U.S. financial system from the early 1990s to 2007 via more than 20,000 transactions on behalf of Cuba and Iran, according to court documents.
Half of the $619 million settlement will be distributed by the Manhattan District Attorney’s office to the city and the state, and the other half will be paid to the U.S., Vance said in the statement.
ING cooperated with the two-year probe into its conduct, conducted an internal investigation, accepted responsibility for its conduct and voluntarily took remedial actions before entering into deferred prosecution agreements, Vance said.
“The violations that took place until 2007 are serious and unacceptable,” Jan Hommen, chief executive officer of ING Groep, said in a statement. “Since starting the investigations in 2006, ING Bank has taken decisive actions to strengthen compliance throughout the organisation and heighten employee awareness of compliance risks.”
The U.S. government restricts certain countries including Iran, Sudan and Cuba from using the U.S. banking system. The U.S. Department of the Treasury’s Office of Foreign Assets administers sanctions, and banks in Manhattan, which process most of the world’s payments of U.S. dollars, use special filters to prevent sanctioned countries, as well as terrorists and other criminals, from using the banks.
ING processed payments on behalf of sanctioned customers without referring to their origin, eliminated data that would have revealed the involvement of those entities and advised clients on how to conceal their involvement in such transactions to evade filters, Vance’s office said.
ING was the first bank to establish an office in Cuba since the country’s 1959 revolution, and the government in 1994 issued a license allowing it to participate in Netherlands Caribbean Bank, a joint venture between ING and Acemex, a shipping company owned by Cuba, according to a copy of the deferred prosecution agreement provided by Vance’s office. Cuba also allowed ING to open its own office in Havana in 1994.
ING’s Curacao office processed U.S. dollar payments for the Netherlands Caribbean Bank, ING’s Havana office, and a third Cuban bank without making reference to their Cuban origins, according to the agreement.
Bank managers ordered workers to omit the words “Cuba” or “Havana” from payment messages, and made it clear that employees who revealed the involvement of Cuban parties would be subject to reprimand and possible termination, according to the agreement.
The bank’s Trade and Commodity Finance Department in Rotterdam also helped two sanctioned companies that are majority-owned by the Cuban government conduct transactions through the U.S. financial system, according to the agreement.
ING offices in the Netherlands and Belgium also provided services to sanctioned entities and customers that did business with them, including trade services relating to the procurement of aircraft parts for a Dutch customer’s Iranian clients, according to the agreement.
ING Bank’s Belgium office held a U.S. dollar account for the Central Bank of Iran, also known as Bank Markazi. The account was used to receive proceeds of oil purchases by customers from Iran’s national oil company using cover payments that didn’t mention Iranian names, according to the agreement.
ING’s offices in France and Romania also processed U.S. dollar transactions for banks in Cuba and Iran, including a $1.6 million letter of credit issued by Bank Tejarat of Iran to finance Iran Air’s purchase of an aircraft engine made in the U.S. from a Romanian trading company, according to the agreement.
Vance said in a speech on money laundering in Washington in November that more announcements on settlements would come. He said today that his office’s “work in this area is active and will continue.”
“The foreign banks that were processing these payments for customers in Iran, Sudan, Libya and other rogue nations violated the law, and undermined international security, by enabling their U.S. correspondents to process wire payments that otherwise would have been rejected,” Vance said at the time, according to a transcript of his speech. “They did so systematically, intentionally and as part of their daily business.”
Vance also said in the speech that his office’s probe of Islamic Republic of Iran Shipping Lines found that some U.S. banks had been deceived into executing transactions on behalf of Iranian entities seeking to advance that nation’s nuclear ambitions. The shipping line was charged in June with a scheme to move more than $60 million through at least seven U.S. banks.
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