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Money laundering redux

CharteredLondon-based Standard Chartered Bank stands accused by New York regulators of laundering $250 billion in oil money for Iran.

It follows a string of similar scandals, such as one uncovered at HSBC, in which offices in Buffalo helped to launder money from Mexican drug cartels, shady Russian business men and terrorists. HSBC ended up setting aside $700 million to cover penalties for that activity.

The New York Times has an interesting story today that looks at how each of the banks exploited a weak law in order to make money laundering easier:

Foreign banks until 2008 were allowed to transfer money for Iranian clients through their American subsidiaries to a separate offshore institution. In the so-called U-turn transactions, the banks had to provide scant information about the client to their American units as long as they had thoroughly vetted the transactions for suspicious activity. Suspecting that Iranian banks were financing nuclear weapons and missile programs, the loophole was finally closed in 2008 . . . .

Foreign banks until 2008 were allowed to transfer money for Iranian clients through their American subsidiaries to a separate offshore institution. In the so-called U-turn transactions, the banks had to provide scant information about the client to their American units as long as they had thoroughly vetted the transactions for suspicious activity. Suspecting that Iranian banks were financing nuclear weapons and missile programs, the loophole was finally closed in 2008 . . . . 

Since the tighter sanctions went into effect, there have been no charges brought on post-2008 conduct, although Treasury’s letter says that investigations are ongoing.

Gina Talamona, a Justice Department spokeswoman, said that the lack of recent illegal conduct is because the settlements with foreign banks “required the banks to implement rigorous compliance programs and other safeguards” against further violations of sanctions. She said that the department’s enforcement program “has had a significant impact on banking industry practices involving sanctions.”

- Samantha Maziarz Christmann


tagged

Banks | Corruption | Regulation
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