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From Banking and Finance Law Daily, October 21, 2015

French bank fined over $787M for violating U.S. sanctions

By Stephanie K. Mann, J.D.

Multiple enforcement actions have been brought against Crédit Agricole for violations of U.S. sanctions and various New York state laws. Settlement agreements have been reached with the Federal Reserve Board, the Treasury Department’s Office of Foreign Assets Control, and the New York Department of Financial Services, totaling $787.3 million. The settlement resolves the investigation into the bank’s alleged widespread practice of removing, omitting, or obscuring references to U.S.-sanctioned parties in 4,297 financial and trade transactions routed to or through banks in the United States between 2003 and 2008 in apparent violation of primarily the Sudanese Sanctions Regulations, 31 CFR part 538, and also the Cuban Assets Control Regulations, 31 CFR part 515, the Burmese Sanctions Regulations, 31 CFR part 537, and the Iranian Transactions and Sanctions Regulations, 31 CFR part 560.

For a number of years, through 2008, Crédit Agricole, which is based in France, and certain of its predecessor banks and subsidiaries—including Crédit Lyonnais (Suisse) S.A., Crédit Agricole Indosuez S.A., and Crédit Agricole (Suisse) S.A., all located in Switzerland—allegedly processed thousands of transactions to or through U.S. financial institutions that involved countries and/or individuals and entities subject to OFAC sanctions regulations. Personnel, including managers, from various business units within these Crédit Agricole entities, were said to be aware of U.S. economic sanctions programs and understood that U.S. financial institutions were required to block or reject transactions involving an OFAC-sanctioned country or person.

Despite this knowledge, the banks allegedly used cover payments and/or implemented special payment practices in a manner that omitted references to U.S.-sanctioned parties in U.S. Dollar Society for Worldwide Interbank Financial Telecommunication payment messages sent to the United States. In doing so, they prevented U.S. financial institutions from appropriately reviewing and analyzing the transactions for compliance with OFAC regulations and certain New York state laws.

OFAC. OFAC reached a settlement with Crédit Agricole for a $329,593,585 fine. Under the settlement agreement, the bank is also required to maintain policies and procedures to minimize the risk of the recurrence of such conduct in the future. Crédit Agricole will be required to provide OFAC with copies of submissions relating to an OFAC compliance review that will be conducted by the Fed.

“OFAC has no tolerance for the intentional concealment of sanctions-related information in payments sent to the United States and U.S. financial institutions in apparent violation of U.S. economic sanctions laws, and we will aggressively enforce U.S. economic sanctions,” said John E. Smith, Acting Director of OFAC. “While the settlement covers activities through 2008, the fact that most of the apparent violations occurred prior to 2006 highlights a positive trend. It’s clear that OFAC’s efforts, coupled with our close cooperation with law enforcement and financial regulators in the United States, have dramatically enhanced awareness regarding sanctions compliance throughout the financial industry in recent years.”

Fed. The Fed announced a $90.3 million penalty and consent cease and desist order against Crédit Agricole. The order also requires Crédit Agricole, including its foreign subsidiary, Crédit Agricole Corporate and Investment Bank, to implement an enhanced program to ensure global compliance with U.S. sanctions administered by OFAC.

The Fed order also prohibits Crédit Agricole from re-employing the individuals involved in the past actions or retaining them as consultants or contractors. The Fed is also investigating whether enforcement actions are appropriate against these or other individuals who may have been involved in the conduct underlying the enforcement actions against the institution. Crédit Agricole has agreed to cooperate in these investigations, but is not the subject of these investigations.

NYDFS. The overall $787.3 million Crédit Agricole will pay includes $385 million to the NYDFS, $156 million to the Manhattan District Attorney's Office, and $156 million to the U.S. Attorney's Office for the District of Columbia. Acting Superintendent Anthony J. Albanese said: "Crédit Agricole engaged in a series of schemes to evade U.S. sanctions and deceive its regulators. Our agency will continue to aggressively investigate and uncover misconduct at banks meant to circumvent U.S. sanctions laws—both past and present."

According to NYDFS, while the vast majority of the bank employees who were centrally involved in the improper conduct discussed in the Consent Order no longer work at the bank, one such employee does remain employed by the bank. As part of the settlement agreement, DFS has ordered the bank to take all steps necessary to terminate the employee, who was involved in the improper conduct but who remains employed by the bank: a relationship manager who at the time had responsibility for Iranian clients and drafted the September 2005 memo detailing the bank's policy on non-transparency related to U.S. dollar payments for Iranian clients, known as "Special Treatment of Iranian Related Payments."

Companies: Crédit Agricole; Crédit Agricole (Suisse) S.A.; Crédit Agricole Corporate and Investment Bank; Crédit Agricole Indosuez S.A.; Crédit Lyonnais (Suisse) S.A

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