D.A.’s Office Jointly Investigated Bank for Violating U.S. Sanctions and Falsifying Business Records Under New York Law, Yielding More Than $1 Billion in Total Penalties to N.Y., U.S., and U.K. Agencies
DA’s Office and Partners Have Secured More Than $13B From Big Banks Since 2009
Manhattan District Attorney Cyrus R. Vance, Jr., the U.S. Attorney’s Office for the District of Columbia (“USAO-DC”), and the Department of Justice Money Laundering and Asset Recovery Section’s Bank Integrity Unit (“MLARS), today announced the resolution of an investigation into the criminal conduct of U.K.-based Standard Chartered Bank (“SCB”), and the payment of more than $1 billion in total criminal and regulatory penalties and forfeiture. At the same time and as part of the $1 billion total, the New York State Department of Financial Services (“DFS”) announced a concurrent regulatory action against SCB. In the amended Deferred Prosecution Agreement (“DPA”) and corresponding Statement of Facts, SCB admitted that it violated New York State law by falsifying the records of New York financial institutions, and will pay a fine to the D.A.’s Office, which the D.A.’s Office will distribute in accordance with New York State law. Both the City and State of New York will each receive $141.7 million from the D.A.’s Office. This is the second such resolution with the bank, following the execution of DPAs in 2012 between SCB, the Manhattan D.A.’s Office, and the Department of Justice, which resulted in a $227 million penalty for similar conduct.
Manhattan D.A. Cy Vance, Jr. said: “My office’s unique jurisdiction and expert personnel have again enabled us to deliver hundreds of millions in ill-gotten gains to the People of New York while contributing to America’s longstanding effort to promote democratic values around the world. We are honored and privileged to collaborate in this shared endeavor with the supremely talented public servants of the U.S. Departments of Justice and Treasury, the New York Department of Financial Services, and the Federal Reserve Bank of New York.”
Acting DFS Superintendent Linda A. Lacewell said: “Global financial institutions serve as the first line of defense against money laundering and the financing of terrorist activities and those that fail to foster a strong compliance culture will be held accountable. While Standard Chartered has taken significant remedial measures since 2014 to develop a more robust program to prevent these egregious activities, the time has come for the bank finish the job. DFS will take whatever measures necessary to ensure that the bank lives up to its word and maintains effective safeguards against sanctions violations and money laundering. We appreciate the cooperation and assistance of the Office of the Manhattan District Attorney, Federal Reserve Bank of New York, and the U.S. Departments of Justice and Treasury in helping DFS resolve this matter.”
U.S. Assistant Attorney General Brian A. Benczkowski said: “Today’s resolution sends a clear message to financial institutions and their employees: if you circumvent U.S. sanctions against rogue states like Iran—or assist those who do—you will pay a steep price. When a global bank processes transactions through the U.S. financial system, its compliance program must be up to the task of detecting and preventing sanctions violations—and when it is not, banks have an obligation to identify, report, and remediate any shortcomings. The Justice Department is committed to protecting our U.S. financial system and will continue to hold financial institutions and individuals to account when they violate U.S. sanctions laws.”
U.S. Attorney for the District of Columbia Jessie K. Liu said: “SCB and the individuals whose charges were unsealed today undermined the integrity of our financial system and harmed our national security by deliberately providing Iranians with coveted access to the U.S. economy. The financial penalty announced today leaves no doubt that repeat corporate offenders with deficient compliance programs will pay a steep price. When bank employees and customers conspire to violate U.S. sanctions and subvert our national security, we will bring them to justice no matter where they reside or operate.”
The investigation determined that, beyond the conduct that was the subject of the 2012 DPAs, SCB, through its employees, processed approximately 9,500 additional financial transactions worth approximately $240 million through U.S. financial institutions for the benefit of Iranian entities and individuals from 2007 through 2011. It also showed that high-level SCB officials knew of specific compliance deficiencies and risks that allowed the criminal conduct to occur, but were slow to address these issues. Certain high-level SCB officials also did not share with law enforcement some of these issues during the investigation leading to the 2012 DPAs, despite having been in a position to do so.
As part of the resolution, SCB has taken responsibility for its criminal conduct and has agreed to pay $720 million in forfeiture and fines to the Department of Justice and New York State. SCB will pay $292 million directly to the D.A.’s Office, which the D.A.’s Office will distribute in accordance with New York State law. SCB has also agreed to the amendment and extension of its 2012 DPA with the Manhattan D.A.’s Office for an additional two years. Pursuant to the amended DPA, SCB has agreed to, among other things, adhere to best practices for international banking transparency, implement procedures and training designed to ensure U.S. sanctions compliance, and pay penalties and forfeiture within five business days.
In addition to the $720 million settlement resolving the joint criminal investigation conducted by the Manhattan D.A.’s Office, USAO-DC, and MLARS, SCB also has agreed to resolve parallel regulatory inquiries with the Board of Governors of the Federal Reserve System (“Federal Reserve”), the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”), the New York State Department of Financial Services (“DFS”), and the United Kingdom’s Financial Conduct Authority (“FCA”) arising out of the same pattern of conduct. Pursuant to those resolutions, SCB will pay additional penalties totaling more than $477 million.
In connection with the conspiracy, a former employee of SCB’s branch in Dubai, United Arab Emirates (UAE), referred to as Person A in the amended DPA and Factual Statement, pleaded guilty in New York County Supreme Court to Falsifying Business Records in the First Degree and Conspiracy in the Fifth Degree. Separately, a two-count criminal indictment was unsealed today in federal court in the District of Columbia charging Mahmoud Reza Elyassi, an Iranian national and former customer of SCB Dubai, with participating in the conspiracy.
The U.S. government restricts certain persons, countries, and entities from accessing the U.S. banking system. Pursuant to U.S. law, financial institutions are prohibited from participating in certain transactions with these persons, countries, and entities. New York law makes it a crime to, “with intent to defraud . . . make or cause a false entry in the business records of an enterprise . . . or prevent the making of a true entry or cause the omission thereof in the business records of an enterprise.” It is a felony if, in connection with this conduct, the persons or entities “intend to defraud includes an intent to commit another crime or aid or conceal the commission thereof.”
As part of the amended DPA announced today, SCB admitted that, from 2007 through 2011, two former employees of its branch in Dubai, acting within the scope of their employment, 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. 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. 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. These employees helped Elyassi conceal the accounts’ Iranian connections and facilitated foreign currency transactions in U.S. dollars.
SCB admitted to processing approximately 9,500 separate U.S. dollar transactions through the U.S., totaling approximately $240 million, on behalf of Elyassi’s companies. More than half of these U.S. dollar transactions 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. High-level SCB officials made presentations to U.S. law enforcement regarding SCB’s sanctions compliance during the initial investigation and were aware of these deficiencies, but did not share this information with U.S. law enforcement prior to execution of the 2012 DPAs.
Since mid-2013, SCB has engaged in significant remediation, including the comprehensive enhancement of its U.S. economic sanctions compliance program and significant improvements to its financial crime compliance program. Once presented with evidence of potential post-2007 sanctions violations, SCB provided substantial cooperation in the D.A.’s Office investigation, including by producing significant evidence of criminal wrongdoing perpetrated by its employees and customers.
Prior Sanctions Cases
In 2014, BNP Paribas Bank (BNPP) pleaded guilty in Manhattan to falsifying business records and conspiring to evade U.S. sanctions and paid a record $8.83 billion in criminal forfeiture and penalties.
Since 2009, ten banks, including BNPP, have forfeited in settlements approximately $13 billion for their illegal conduct. The Manhattan D.A.’s Office has additionally entered into Deferred Prosecution Agreements with the following financial institutions related to U.S. sanctions violations and violations of New York State law:
- Société Générale for $162.8 million in 2018
- Crédit Agricole Corporate and Investment Bank for $312 million in 2015
- Commerzbank for $342 million in 2015
- HSBC Bank for $375 million in 2012
- Standard Chartered Bank for $327 million in 2012
- ING Bank for $619 million in 2012
- Barclays Bank for $298 million in 2010
- Credit Suisse AG for $536 million in 2009
- Lloyds TSB Bank for $350 million in 2009
The six-year investigation was conducted jointly with the U.S. Attorney’s Office for the District of Columbia, the Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section’s Bank Integrity Unit, the U.S. Internal Revenue Service Criminal Investigation, and the Federal Bureau of Investigation. D.A. Vance recognized the substantial contributions of the Federal Reserve Bank of New York, OFAC, the FCA, and DFS, which conducted their own investigations.
The SCB case was investigated and prosecuted by Assistant D.A.s José A. Fanjul and Kevin Wilson, under the supervision of Assistant D.A.s Garrett Lynch (Deputy Chief of the Major Economic Crimes Bureau), Christopher Conroy (Chief of the Major Economic Crimes Bureau), and Executive Assistant D.A. Michael Sachs (Chief of the Investigations Division). Former Trial Preparation Assistants Ingrid Eicher, Brittney Nagle, Katharine Witteman, and Devin Bergstein assisted in the investigation. Deputy Chief Investigator Jonathan Reid and Senior Rackets Investigator Samuel Ahdout, under the supervision of Chief Investigator Walter Alexander, also assisted with this investigation.
D.A. Vance also thanked the following agencies and individuals for their assistance in the investigation: Principal Assistant U.S. Attorney for the USAO-DC Alessio Evangelista; Assistant U.S. Attorneys Michael Friedman and Peter Lallas; Trial Attorney Jennifer Wine and Litigation Financial Analyst Michael Menefee of the DOJ’s MLARS; Jeffrey LaMirand of the IRS; YoonHi Greene, Sean O’Malley, Jennifer Spain, Julie Roth, and Joseph Catania of the Federal Reserve Bank of New York; Samuel Phelps of the Department of Treasury’s OFAC; and Matthew Levine, Elizabeth Nochlin, and Megan Prendergast of the New York State DFS.