On April 15, the United States Department of Justice announced that Munich-based UniCredit Bank AG (UCB AG) had agreed to plead guilty to conspiring to violate the International Emergency Economic Powers Act (IEEPA) and to defraud the United States, “by processing hundreds of millions of dollars of transactions through the U.S. financial system on behalf of an entity designated as a weapons of mass destruction proliferator and other Iranian entities subject to U.S. economic sanctions.” UCB AG and another bank that is part of the UniCredit Group, Vienna-headquartered UniCredit Bank Austria (BA), agreed to enter into a series of settlements with federal and local departments and agencies, in which the banks agreed to pay a total of more than $1.3 billion.
With regard to UCB AG, the Department stated that
[a]ccording to court documents, over the course of almost 10 years, UCB AG knowingly and willfully moved at least $393 million through the U.S. financial system on behalf of sanctioned entities, most of which was for an entity the U.S. Government specifically prohibited from accessing the U.S. financial system. UCB AG engaged in this criminal conduct through a scheme, formalized in its own bank polic[i]es and designed to conceal from U.S. regulators and banks the involvement of sanctioned entities in certain transactions. UCB AG routed illegal payments through U.S. financial institutions for the benefit of the sanctioned entities in ways that concealed the involvement of the sanctioned entities, including through the use of companies that UCB AG knew would appear unconnected to the sanctioned entity despite being controlled by the sanctioned entity.
With regard to BA, the Department stated that
[a]ccording to admissions in the non-prosecution agreement and accompanying statement of facts, between 2002 and 2012, BA used non-transparent methods to send payments related to sanctioned jurisdictions such as Iran through the United States. BA conspired to violate IEEPA and defraud the United States by processing transactions worth at least $20 million through the United States on behalf of customers located or doing business in Iran and other countries subject to U.S. economic sanctions or customers otherwise subject to U.S. economic sanctions.
The settlements into which the UniCredit institutions entered include the following:
- Department of Justice: UCB AG agreed to waive indictment and to be charged in and to plead guilty to a one-count felony criminal information charging it with knowingly and willfully conspiring to commit violations of IEEPA and to defraud the United States, from 2002 through 2011. The plea agreement with UCB AG provides that UCB AG is to forfeit $316,545,816 and to pay a fine of $468,350,000. In addition, BA entered into a non-prosecution agreement to resolve an investigation into its violations of IEEPA, and agreed to forfeit $20 million.
- New York County District Attorney’s Office: UCB AG entered into a plea agreement with the New York County District Attorney’s Office (DANY) for violating New York State law, pursuant to which UCB AG will pay $316,545,816. BA also entered into a non-prosecution agreement with DANY for violating New York State law.
- Other Agencies: UniCredit SpA (the parent of both UCB AG and BA), UCB AG, and BA entered into various 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) and the New York State Department of Financial Services (DFS). Under those agreement, the three financial institutions agreed to pay additional penalties of approximately $660 million as follows: $611,023,421 to OFAC, which will be satisfied in part by payments to the Justice Department and the Federal Reserve; $157,770,000 to the Federal Reserve; and $405 million to DFS.
Note: This series of settlements is noteworthy not only for the amount of the sanctions-related financial penalties that UniCredit entities agreed to pay, or the duration of the scheme, but for the fact that UCB AG’s sanction-evasion scheme was formalized in UCB AG’s own policies. That latter fact strongly indicates a serious dereliction of duty by UCB AG’s legal and sanctions-compliance functions. No company that explicitly articulates a commitment to evasion of legal requirements in its policies can claim to have a culture of compliance. Other financial institutions should therefore use this set of settlements, at an appropriate time, as a basis for reviewing their own policies, to see that no provisions on those policies even suggest how their institutions should circumvent or violate any legal requirements.