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Barclays to pay $298 million in U.S. sanctions case

By James Vicini
WASHINGTON | Mon Aug 16, 2010 4:09pm EDT

(Reuters) - Barclays Bank Plc has agreed to pay $298 million to settle criminal charges that it violated U.S. sanctions through dealings with banks in Cuba, Iran, Libya, Sudan and Myanmar, according to U.S. court documents filed on Monday.
The London-based bank was charged with violating the International Emergency Economic Powers Act and the Trading with the Enemy Act as a result of $500 million in illegal transactions from 1995 through 2006, according to the documents. The United States has imposed sanctions and trade embargoes against Cuba, Iran, Libya, Sudan and Myanmar. Barclays was accused of hiding transactions on behalf of banks in those countries. "Barclays violated both U.S. and New York state criminal laws by knowingly and willfully moving or permitting to be moved hundreds of millions of dollars through the U.S. financial system on behalf of banks from Cuba, Iran, Libya, Sudan and Myanmar," according to the documents. "To hide these illegal transactions, Barclays altered and routed payment messages" to ensure that the prohibited transactions could clear its branch in New York and other U.S. financial institutions, according to the documents.

Barclays spokesman Michael O'Looney in New York said the bank and the U.S. Justice Department were in the process of seeking court approval of a deferred prosecution agreement over U.S. dollar payments "involving countries, persons and entities subject to U.S. economic sanctions." "Because this matter is pending before the court, at this time we will have no further comment," he said. SIMILAR CASES The Barclays case marked the latest in a series brought by U.S. prosecutors against major banks. In December, prosecutors detailed a decades-long scheme by Credit Suisse Group AG to hide thousands of transactions on behalf of clients in Iran, Sudan, Libya and other nations. The Swiss bank agreed to pay $538 million. Also last year in a similar case, Lloyds TSB agreed to forfeit $350 million over charges that it faked records so clients from Iran, Sudan and elsewhere could do business in the U.S. banking system. In March, U.S. authorities said Wachovia Bank, now a unit of Wells Fargo & Co, agreed to pay $160 million to settle U.S. charges that it failed to stop more than $100 million of Colombian and Mexican drug traffickers' money being laundered through accounts at the bank. Barclays has agreed to pay $149 million to the U.S. government and a separate $149 million in a deferred prosecution agreement with the district attorney in New York, according to the documents. Barclays and U.S. prosecutors entered into a deferred prosecution agreement that lasts 24 months. A federal judge must approve the agreement. Should Barclays comply with the terms, the charges would be dismissed in two years. Barclays voluntarily disclosed some of the prohibited transactions to U.S. authorities, agreed to cooperate fully and conducted an internal investigation, according to the documents filed in federal court in Washington, D.C. According to the documents, Barclays interviewed more than 175 current and former employees and reviewed more than 100 million records during its review, and has acknowledged responsibility for its actions. A federal judge in Washington held a hearing on the agreement, but delayed approving it because the Barclays official who signed it was not present in court, a Justice Department spokeswoman said. She said it was not known when the hearing would be held, but it likely would be later this week. (Additional reporting by Maria Aspan in New York; Editing by Lisa Von Ahn and Gerald E. McCormick)

Barclays Bank PLC, a United Kingdom corporation headquartered in London was charged with violating the International Emergency Economic Powers Act and the Trading with the Enemy Act as a result of $500 million in illegal transactions from 1995 through 2006. The International Emergency Economic Powers Act enacted October 28, 1977, is a United States federal law authorizing the U.S. Presidents to regulate commerce after declaring a national emergency in response to any unusual and extraordinary threat to the United States which has a foreign source. It is largely an amendment to the Trading with the Enemy Act 1917 and the National Emergencies Act, which deal primarily with when and to what extent the President can declare an emergency. The IEEPA authorizes the president to declare the existence of an "unusual and extraordinary threat... to the national security, foreign policy, or economy of the United States" that originates "in whole or substantial part outside the United States." It further authorizes the president, after such a declaration, to block transactions and freeze assets to deal with the threat. In the event of an actual attack on the United States, the president can also confiscate property connected with a country, group, or person that aided in the attack. The Trading with the Enemy Act, sometimes abbreviated as TWEA, is a United States federal law, enacted in 1917 to restrict trade with countries hostile to the United States. The law gives the President the power to oversee or restrict any and all trade between the U.S. and its enemies in times of war. The Trading with the Enemy Act is often confused with the International Emergency Economic Powers Act, which grants somewhat broader powers to the President and is invoked during states of emergency when not at war. Under IEEPA and TWEA, it is a crime to willfully violate, or attempt to violate, any regulation issued under the act, including those related to Cuba, Iran, Libya, Sudan and Burma. The IEEPA and TWEA regulations are administered by OFAC, Office of Foreign Assets Control. According to court documents, from as early as the mid-1990s until September 2006, Barclays knowingly and willfully moved or permitted to be moved hundreds of millions of dollars through the U.S. financial system on behalf of banks from Cuba, Iran, Libya, Sudan and Burma, and persons listed as parties or jurisdictions sanctioned by OFAC in violation of U.S. economic sanctions.

American sanctions against Cuba go back to the Kennedy administration in the early 1960s, while sanctions against Libya were introduced in 1986 in reaction to Tripoli's support of terrorist organizations. Sanctions against Iran have been in place since 1995, while Myanmar, formerly known as Burma, and Sudan were added to the list two years later. However Barclays processed a total of 61 electronic funds transfers in which the government of Cuba or a Cuban national had interest, violating the U.S. sanction from 2002 till 2005. Then from about 2002 to 2004, Barclays processed three electronic funds transfers in the aggregate amount USD 60,062.41 through financial institutions located in U.S. to the benefit of the government in Iran or persons in Iran, including various Iranian financial institutions in violation of prohibition against the exportationdirectly or indirectly from the U.S.of any services to Iran or the government of Iran. Barclays also deliberately used a less transparent method of payment messages, known as cover payments, as another way of hiding the sanctioned entities identifying information. However, Barclays Bank admitted a decade-long pattern of violating U.S. banking laws, and taking certain steps to conceal prohibited transactions. Barclays also agreed to forfeit $298 million to the United States and to the New York County District Attorneys Office in connection with violations of the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA). OFAC has also entered into a settlement agreement with Barclays for IEEPA violations that will require Barclays to pay $176 million, which is concurrent with the forfeiture paid as a result of the deferred prosecution agreements. The Federal Reserve Board and the New York State Banking Department announced the issuance of a consent order to cease and desist against Barclays. The order requires Barclays to improve its program for compliance with U.S. economic sanctions requirements on a global basis. The case was prosecuted by Senior Trial Attorney Frederick Reynolds and Trial Attorney Kevin Gerrity of the Criminal Divisions Asset Forfeiture and Money Laundering Section (AFMLS). The case was investigated by the FBIs New York Field Office and the IRS-Criminal Investigations Washington Field Division and Jeremy Wade and Laurie Bender of AFMLS.

The Reference List

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