- French bank must hire monitor to oversee internal controls
- Subsidiary used secret code for clients in illicit exchanges
Credit Agricole SA agreed to pay $787 million to U.S. regulators and enter into a deferred prosecution agreement with the Justice Department to resolve allegations the French bank violated sanctions aimed at Iran and Sudan.
From 2003 to 2008, the bank relied on several schemes to process more than $32 billion in dollar payments on behalf of Sudanese, Iranian, Burmese and Cuban entities, including directing employees to omit identifying information, officials said. A subsidiary employed an internal code, using phrases such as “one of our clients” or “our good customer” to describe parties involved in such transactions.
One client, who referred to the crisis in the Darfur region of Sudan as “an exaggeration in the media,” urged the bank to continue processing payments connected to that country. In some transactions, a Sudanese bank client would send the following request to Credit Agricole’s Geneva subsidiary: "DON’T MENTION SUDAN ON THIS PAYMENT ORDER."
Credit Agricole could be subject to prosecution if it violates any of the settlement’s terms over the next three years. The bank must also hire an outside monitor to oversee its anti-money laundering controls.
The agreement is the first for a big bank since July, when a group of nations led by the U.S. reached a nuclear deal with Iran. On Sunday, they formally adopted the pact, in which the U.S. will ease some sanctions after the Islamic Republic delivers on pledges to restrict its nuclear program.
In resolving the case, Credit Agricole joins 10 other global banks that have entered into similar settlements over the past six years acknowledging conduct that violated U.S. sanctions laws. Earlier this year, Commerzbank AG resolved allegations against it by entering a deferred prosecution agreement. The bank paid $1.45 billion to settle allegations of sanctions violations and money laundering.
And more are pending. European lenders Deutsche Bank AG, Societe Generale SA and UniCredit AG have all disclosed they are cooperating with U.S. authorities in investigations over whether they allowed foreign clients from blacklisted countries to move money through U.S. offices.
Those inquiries are expected to be settled in the next year, according to people briefed on the probes. Representatives of the three banks declined to comment.
Credit Agricole is the second French bank to resolve an investigation into violations of U.S. sanctions laws. Last year, U.S. prosecutors extracted a guilty plea and a record $8.9 billion fine from BNP Paribas SA, France’s biggest bank, for violating restrictions against the same countries.
Credit Agricole said in August that it set aside 350 million euros ($397.2 million) for legal costs in the second quarter related to the U.S. probe. That brought the bank’s total litigation provisions to 1.6 billion euros. The payment of the penalty “will not affect the accounts for the second half of 2015,” the bank said Tuesday in a statement.
“Crédit Agricole has undertaken important voluntary steps to develop and implement measures to prevent and detect non-compliance with sanctions laws and to identify related risks,” the bank said. “It will continue to make improvements to its procedures and controls that are necessary to ensure strict compliance with applicable sanctions regulations.”
Credit Agricole fell 1 percent to 11.05 euros in Paris trading.
The bank’s financial penalty will be divided up among regulators and prosecutors. New York’s Department of Financial Services is getting $385 million, while the Federal Reserve and the Justice Department will received $90.3 million and $156 million respectively. The Manhattan District Attorney’s office, which says it initiated the probe, will get $156 million.
As part of the settlement, Anthony Albanese, acting superintendent of the DFS, directed the bank to fire a managing director who was involved in some of the activity.
“Crédit Agricole engaged in a series of schemes to evade U.S. sanctions and deceive its regulators,” Albanese said in a statement. “Our agency will continue to aggressively investigate and uncover misconduct at banks meant to circumvent U.S. sanctions laws –- both past and present.”
DFS identified $32 billion in dollar clearing transactions in which the identity of the parties was obscured, $442 million of which were illegal. The U.S. identified $312 million in transactions that violated sanctions against Iran, Sudan and other blacklisted countries.
At the federal level, the case is being handled by prosecutors from the office of the U.S. attorney in Washington. The U.S. Treasury’s Office of Foreign Assets Control also signed on to the pact. The bank entered into the deferred prosecution agreement in federal court in Washington Tuesday, for violations of the International Emergency Economic Powers Act and the Trading With the Enemy Act.
“Sanctions laws are critical to both our national security and foreign policy interests,” said Channing Phillips, U.S. Attorney for Washington, in a statement.
Manhattan D.A. Cyrus Vance Jr. said the settlement sends “a clear message that financial institutions must comply with sanctions against rogue nations.”