On April 9, the United States Department of Justice announced that the London-based financial institution Standard Chartered Bank (SCB) had agreed to pay a total of more than $1 billion to the Justice Department and other U.S. and foreign authorities, for conspiring to violate the International Emergency Economic Powers Act (IEEPA). According to the Justice Department, the reported conspiracy, which lasted from 2007 through 2011, “resulted in SCB processing approximately 9,500 financial transactions worth approximately $240 million through U.S. financial institutions for the benefit of Iranian entities.”
The breakdown of the various settlements into which SCB entered is as follows:
- U.S. Department of Justice: Forfeiture of $240 million, a fine of $480 million, and to the amendment and extension of its existing deferred prosecution agreement (DPA) with the Justice Department for an additional two years;
- New York County District Attorney’s Office (DANY): Amendment of its DPA with DANY and extension of that DPA for two additional years, and an additional financial penalty of $292,210,160;
- Other Settlement Agreements: SCB entered into separate settlement agreements with the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the Board of Governors of the Federal Reserve System (the Federal Reserve), the New York State Department of Financial Services (DFS), and the United Kingdom’s Financial Conduct Authority (FCA) under which SCB shall pay additional penalties totaling more than $477 million. The Justice Department has agreed to credit a portion of these related payments and, after crediting, will collect $52,210,160 of the fine, in addition to SCB’s $240 million forfeiture.
In connection with the conspiracy, the Justice Department filed a superseding information regarding SCB in the U.S. District Court for the District of Columbia, charging SCB with two counts of conspiracy to violate IEEPA. In addition, an unnamed former employee of the SCB branch in Dubai, United Arab Emirates (UAE) (referred to as Person A), pleaded guilty in the same U.S. District Court for conspiring to defraud the United States and to violate IEEPA, and that court unsealed a two-count criminal indictment charging Mahmoud Reza Elyassi, an Iranian national and former customer of SCB Dubai, with participating in the conspiracy.
The Justice Department stated that, as part of the amended DPA,
SCB admitted that, from 2007 through 2011, two former employees of its branch in Dubai, willfully conspired to help Iran-connected customers conduct U.S. dollar transactions through the U.S. financial system for the benefit of Iranian individuals and entities. One of these Iran-connected customers was Elyassi, an Iranian national who operated business accounts with SCB’s Dubai branch while residing in Iran. SCB’s former employees helped Elyassi manage these accounts, concealed their Iranian connections, and facilitated foreign currency transactions in U.S. dollars. SCB’s former employees knew that Elyassi’s business organizations operated from Iran and conducted U.S. dollar transactions for the benefit of Iranian interests, and helped Elyassi disguise his Iranian connections to avoid suspicion.
According to the unsealed indictment of Elyassi,
Elyassi and his co-conspirators registered numerous supposed general trading companies in the UAE, and used those companies as fronts for a money exchange business located in Iran. Between November 2007 and August 2011, Elyassi used a business account at SCB’s Dubai branch to cause U.S. dollar transactions to be sent and received through the U.S. financial system for the benefit of individuals and entities ordinarily resident in Iran in violation of U.S. economic sanctions.
SCB admitted that on behalf of Elyassi’s companies between 2007 and 2011, it had processed approximately 9,500 U.S. dollar transactions through the United States that totaled approximately $240 million. More than half of these U.S. dollar transactions, the Justice Department stated, “were the result of deficiencies in SCB’s compliance program which allowed customers to request U.S. dollar transactions from within sanctioned countries, including Iran.”
The Justice Department credited SCB with having engaged in significant remediation since mid-2013, “including the comprehensive enhancement of its U.S. economic sanctions compliance program and significant improvements to its financial crime compliance program.” It also acknowledged that after SCB was “presented with evidence of potential post-2007 sanctions violations, SCB provided substantial cooperation in the government’s investigation, including by producing significant evidence of criminal wrongdoing perpetrated by its employees and customers.”
Note: This amendment and extension of the SCB DPA is a substantial expansion of the original DPA that SCB had reached with the Justice Department in 2012. That DPA, as indicated in Count One of the superseding information, addressed SCB’s participation in a criminal conspiracy from 2001 through 2007 and resulted in SCB’s paying a $227 penalty under the terms of that DPA. Count Two of the superseding information addressed SCB’s participation in a criminal conspiracy to violate IEEPA from 2007 through 2011, which the Justice Department alleged “resulted in SCB intentionally processing U.S. dollar transactions through the U.S. financial system for the benefit of Iranian individuals and entities worth approximately $240 million.”
It may be instructive to compare and contrast the SCB resolution with the Justice Department’s November 2018 sanctions-related DPA and resolution with Société Générale S.A. (SG), with regard to the three factors that are central to corporate resolutions under the Justice Department’s Corporate Enforcement Policy:
- Voluntary Self-Disclosure: Neither institution engaged in voluntary self-disclosure. In SG’s case, the U.S. Attorney’s Office for the Southern District of New York specifically stated that “[d]espite the awareness of both SG’s senior management and Group Compliance that SG had engaged in this unlawful conduct, SG did not disclose its conduct to OFAC or any other U.S. regulator or law enforcement agency until well after the commencement of the Government’s investigation.”
- Cooperation: In SCB’s case, the Justice Department credited it with “substantial cooperation.” In SG’s case, the U.S. Attorney’s Office credited it with “undertaking . . . a thorough internal investigation, [and] collecting and producing voluminous evidence located in other countries to the full extent permitted under applicable laws and regulations . . . .”
- Remediation: In SCB’s case, the Department credited it with “significant remediation.” In SG’s case, the U.S. Attorney’s Office credited it with “enhancement of its compliance program and sanctions-related internal controls both before and after it became the subject of a U.S. law enforcement investigation.”
In the end, both institutions ended up paying, due to total forfeitures and financial penalties, more than $1 billion each to resolve their sanctions-related misconduct. That fact alone should prompt other financial institutions that operate globally to take their sanctions compliance programs utterly seriously, including by regularly and thoroughly reviewing them to determine whether they are operating effectively. If there are any financial institutions that are still unclear about the reach of U.S. law enforcement and regulators to enforce U.S. sanctions, the SCB and SG resolutions should leave no doubt in anyone’s mind.