Crédit Agricole To Pay $787.3 Million To US Over Sanctions Breaches

Tom Burroughes

22 October 2015

Crédit Agricole Corporate and Investment Bank, a corporate and investment bank owned by French group , has agreed to pay a total of $787.3 million in criminal and civil penalties and enter a deferred prosecution agreement with US authorities for violating sanctions involving Sudan and other jurisdictions.

The bank entered the agreement with the US Attorney’s Office of the District of Columbia for breaches of the International Emergency Economic Powers Act (IEEPA) and the Trading With the Enemy Act (TWEA). The bank also entered into settlement agreements with the Treasury Department’s Office of Foreign Assets Control (OFAC), the Board of Governors of the Federal Reserve System, the New York County District Attorney’s Office and the New York State Department of Financial Services (DFS).

The cost of the settlement is dwarfed by last year’s $8.9 billion sum imposed on for sanctions breaches, but illustrates how US authorities continue to target foreign-owned banks for processing transactions allegedly in breach of such controls. The issue also highlights the continued need for banks to develop robust know-your-client and anti-money laundering systems.

A one-count felony criminal information and a related civil forfeiture complaint were filed yesterday in the federal court in the District of Columbia, charging CACIB with “knowingly and willfully conspiring to defraud the United States and to commit violations of IEEPA and TWEA”.

“CACIB has waived federal indictment, agreed to the filing of the information and civil forfeiture complaint, and has accepted responsibility for its criminal conduct and that of its employees,” a statement from the US Department of Justice said.

The New York County District Attorney’s Office also announced that CACIB has entered into a separate deferred prosecution agreement, and that, in the corresponding factual statement, CACIB admitted that it violated New York state law by falsifying the records of New York financial institutions.

Additionally, the US Federal Reserve said the bank has agreed to a cease and desist order, to take certain remedial steps to comply with US law and to pay a civil monetary penalty of $90.3 million. The bank has agreed to employ a compliance consultant for a period of one year and pay a monetary penalty of $385 million.

“CACIB, through its subsidiaries, violated our laws and our interests by conducting business on behalf of entities in Sudan,” US Attorney Channing Phillips said in a statement.

“In this case, the overwhelming majority of the unlawful conduct occurred at a foreign subsidiary that no longer exists. Although CACIB moved quickly to end these unlawful transactions and fully cooperated with investigators, today’s resolution demonstrates that there will be significant consequences for any financial institution that allows its foreign subsidiaries that do not intend to respect US law to, nevertheless, access the US financial system.”

Between August 2003 and September 2008, CACIB subsidiaries in Geneva “knowingly and willfully moved approximately $312 million through the US financial system on behalf of sanctioned entities located in Sudan, Burma, Iran and Cuba,” the DoJ statement said.

Specifically, during this time period, these CACIB subsidiaries employed deceptive practices that concealed the involvement of banks designated as specially designated nationals (SDNs) and other corporate entities in financial transactions that transited through the US, it continued.

The bank’s conduct caused about $312 million in unlawful transactions to pass through US financial systems; almost all of the bank’s violations involved Sudanese business organisations.

CACIB subsidiaries also unlawfully caused transactions on behalf of clients located in Burma, Iran and Cuba to transit through the US, the DoJ said.

The DoJ said the bank has admitted that its employees permitted 11 Sudanese banks to maintain US dollar accounts with CACIB - six of the Sudanese banks were SDNs. CACIB’s subsidiaries relied primarily on non-transparent payment messages, known as cover payments, to mask the unlawful payments that were sent through the US.