The U.S. Department of Justice (DOJ) recently sent a strong message to international banks with a record penalty of nearly $9 billion on one of the world's largest banks for violating U.S. sanctions against Sudan, Cuba and Iran. DOJ also secured an unprecedented guilty plea from the French bank, as well as a ban on some of its dollar-clearing operations for 2015.
The bank is accused of knowingly concealing more than $190 billion in transactions over the course of ten years to evade U.S. sanctions. U.S. officials say that, despite knowledge of the humanitarian crisis in the Sudan and its government's terrorist connections, the bank put profits first and set up elaborate payment structures using satellite banks to disguise the origin of Sudanese transactions. The bank also evaded sanctions against entities in Iran and Cuba by stripping information from wire transfers so they could pass through the U.S. system undetected.
Prosecutors claim the criminal charges and substantial penalty stem from the egregious nature of the conduct, the volume of illicit transactions and the fact that the conduct continued despite warnings and inquiries from U.S. officials. However, this case is also a direct result of a shift in DOJ policy towards a more concerted effort to hold major international banks accountable for illicit financial transactions.
One example of the department's new prosecutorial direction is its insistence on pursuing criminal charges. Previously, DOJ used deferred-prosecution agreements allowing banks to avoid criminal charges to settle alleged violations of U.S. sanctions and Office of Foreign Assets Control (OFAC) rules. This is also the first time regulators have banned a bank from conducting certain U.S. dollar transactions. Such heightened regulatory scrutiny, together with tighter U.S. sanctions and political pressure, amplifies the need for financial institutions to ensure they have effective compliance procedures and practices in place.