Recent FCPA cases make clear that foreign companies and personnel are not immune from investigation and prosecution here in the United States, and that US authorities will exercise the full reach of their jurisdiction to deter corruption in the global marketplace. The recently announced settlement with the UK-based Lloyds TSB Bank plc (“Lloyds”) in connection with alleged violations of the International Emergency Economic Powers Act (“IEEPA”), demonstrates that the US is equally committed to enforcing US sanctions laws against non-US companies. On January 9, 2009, the Department and New York County District Attorney’s Office (“NYDA”) announced that Lloyds agreed to forfeit $350 million to the United States and the NYDA due to its role in illegally conducting transactions on behalf of customers from Iran, Sudan and other countries sanctioned in programs administered by the Office of Foreign Assets Controls (“OFAC”).36 Lloyds also entered into Deferred Prosecution Agreements with the Department and the NYDA (the “Agreements”) in which it agreed to the filing of a one count federal criminal Information charging it with violating IEEPA and the Iranian Transaction Regulations issued thereunder.37 Pursuant to the terms of the Agreements, the charge will be held in abeyance for a period of 24 months or less, at the discretion of the Department and the NYDA, so long as Lloyds complies with various conditions including, among other things: (1) continuing cooperation with the Department and NYDA in their joint investigation; (2) conducting a historical review of US Dollar payments processed through Lloyds’ UK processing centers and Dubai branch with the assistance of an independent consultant; and (3) demonstrating future full compliance with international Anti-Money Laundering and Combating Financing of Terrorism best practices and the Wolfsberg Anti-Money Laundering Principles for Correspondent Banking.38
Interestingly, the conduct at issue did not involve actions on the part of Lloyds’ US branches. According to the stipulated Factual Statement exhibited to the Agreements, between in or about the mid-1990s and in or about January 2007, Lloyds, “in the United Kingdom,” systematically violated both US and New York laws by “stripping” material data, such as names and addresses, from outgoing USD payment messages that revealed the transactions involved countries, banks, or persons listed as sanctioned parties by OFAC. These practices allegedly allowed transactions to go undetected by OFAC-filtering systems used by Lloyds’ US correspondent banks that processed the transactions. As a result, according to the Factual Statement, US banks provided services to sanctioned countries that may have otherwise been blocked for investigation or rejection pursuant to OFAC regulations. Additionally, Lloyds’ conduct allegedly prevented the US banks from making and keeping accurate records of their transactions.
At least nine European banks are reportedly still under investigation for similar violations of US sanctions laws.39 Given the significant criminal and civil penalties that can be imposed, foreign banks should re-examine their existing sanctions compliance programs to ensure that adequate precautions are in place to prevent OFAC violations.40