OFAC Goes After Barclays

Barclays fined $298m for sanction breaking

Barclays faces penalty from US authorities for handling covert financial transactions involving banks in Cuba, Iran and Libya

* Andrew Clark
* guardian.co.uk, Monday 16 August 2010 20.27 BST


Barclays is to pay $298m (£190m) in fines to the US authorities for "knowingly and willfully" violating international sanctions by handling hundreds of millions of dollars in clandestine transactions with banks in Cuba, Iran, Libya, Sudan and Burma.

The British bank yesterday agreed to pay financial penalties to settle two criminal charges laid by the US department of justice, which accused Barclays of violating a "trading with the enemy" act which prohibits business with certain countries viewed as threats to national security.

Documents filed at a federal court in Washington accused Barclays of handling money transfers totalling $500m from banks in prohibited countries through its dollar clearance branch in New York between 1995 and 2006. Barclays is not alone in facing such charges: Lloyds TSB and Credit Suisse both settled with the US government last year over similar dealings with institutions in repressive regimes.

"For more than a decade, Barclays knowingly and willfully engaged in practices outside the US that caused its New York branch and other financial institutions located in the US to process payments in violation of US sanctions," says an affidavit filed by the US government, which described Barclays as a London-based institution employing 144,000 people in 50 countries with 48m customers.

Under a deferred prosecution agreement signed by Barclays' general counsel, Mark Harding, the bank has agreed to a string of measures to improve training and tighten internal procedures, and to co-operate with any further investigation by the US authorities. The bank is paying $149m to the US department of justice and a further $149m to the office of New York's district attorney.

The deal went before a Washington judge for approval yesterday. But judge Emmet Sullivan adjourned the hearing, saying he wanted Harding to appear in person: "He's the one who signed the pleadings and he should be here."

The episode is an embarrassing blot for Barclays, which has been working hard to build its presence in the US with a view to becoming a top-tier Wall Street player. Barclays bolstered its presence in investment banking two years ago by buying much of the US operation of bankrupt Lehman Brothers in a deal worth $1.75bn.

Court documents reveal that Barclays co-operated proactively with the US authorities, initially approaching the US treasury's office of foreign assets control in May 2006 to own up to four sanctions-busting transactions.

A Barclays spokesman confirmed that the bank was "in the process of seeking court approval" for a settlement with prosecutors but added: "Because this matter is pending before the court, at this time we will have no further comment."

The US government has vowed to come down hard on sanctions-busting. Cuba has been barred from business with the US since President Kennedy's tenure in the White House in the early 1960s. Sanctions have been in place against Iran since 1995 and were imposed on Sudan and Burma in 1997. Libya was on a list of "state sponsors of terrorism" until 2006, although relations have since thawed.

Prosecutors contend that foreign banks with a presence in the US have colluded in giving institutions in these repressive regimes a back-door route into the American financial system. Lloyds TSB agreed to pay $350m in January 2009 for its dealings with Libya, Sudan and Iran, while Switzerland's second biggest bank, Credit Suisse, struck a deal in December paying $536m for violating sanctions against Iran.

http://www.guardian.co.uk/business/2010/aug/16/barclays-fined-for-sanction-breaking


Letters

The blockade against Cuba and the banks
Cuba is not the object of any "international sanctions" (Barclays faces $298m fine for breaking sanctions, 17 August). It has been the target for 50 long years of a unilateral US government policy of economic, commercial and financial blockade – as your article illustrates – but one that the international community has overwhelmingly condemned for 18 consecutive years at the UN general assembly. In the successive resolutions on the issue passed over those years, the UN has called on the US to lift this illegal and inhumane measure, which is found to be in violation of basic principles of international law, the UN charter and the freedom of trade and navigation. This year the UN general assembly will no doubt ratify this position for the 19th time. One can only hope that the US government will listen to that worldwide clamour and abandon such an unhelpful policy in favour of a constructive one.
René J Mujica Cantelar
Ambassador of Cuba to the UK


•  I never thought I'd rush to the defence of our reviled banks. But news that the US is still enforcing its discredited policy of sanctions on Cuba and that Barclays has been fined by the US justice department for facilitating trade with, among other countries, Cuba appals me. Recently the US has been relaxing the moratorium on Cuba and we have seen a welcome liberalisation there with the release of political prisoners and a lifting of the heavy hand of the state on private enterprise. Therefore I am shocked that Barclays should be penalised in this manner.

Benedict Birnberg
London

http://www.guardian.co.uk/world/2010/aug/23/blockade-against-cuba-barclays-bank