Barclays ‘questioned over terrorist blacklist’
By Katherine Griffiths, Financial Services
March 3, 2008 The Daily Telegraph UK
hat tip: Margo I.
Barclays is being investigated by the US government over possible breaches of rules banning banks from doing business with states on a terrorist blacklist. The bank said it had been contacted by the Department of Justice (DoJ) and the New York district attorney with questions about payments made in dollars through its New York branch. The payments may have been made by people or companies from states which are on the US blacklist of nations it believes sponsor terrorism. That list includes Cuba, Iran, North Korea, Sudan and Syria.
The US has banned banks from carrying out most transactions in dollars for clients from these countries to try to undermine terrorists’ ability to finance their activity. The probe, which has gone unnoticed until now, was referred to in Barclays’ notes to its annual 2007 results on February 19, where it warned “the potential financial effect of any resolution could be substantial”.
In the past few years US banks have had to obey the rules, which carry heavy penalties and potential criminal prosecution. America is now putting increasing pressure on European banks to follow.
ABN Amro was fined $80m (£40m) in civil penalties in 2005 for transactions through its New York offices which the US government said failed to meet the necessary controls on money laundering.
The case dealt a serious blow to the credibility of the Dutch bank. ABN was sold following a bidding battle to a consortium led by Royal Bank of Scotland in October.
RBS said in its annual results published last week that ABN is the subject of an ongoing criminal probe by the DoJ over the same issue. Negotiations over a possible $500m settlement are ongoing, RBS said.
HSBC yesterday noted in its results that it has a “small representative office in Tehran”. HSBC said it recognised that should it break the US rules on sanctions, there would be “serious legal and reputational consequences”.
America’s Office of Foreign Assets Control (OFAC) polices companies to ensure sanctions are upheld.
Certain foreign institutions are completely banned from making dollar payments, while in other cases “U-turn” transactions are permitted, whereby a dollar payment is legal as long as it does not start or end in the suspect country.
European banks such as Barclays and RBS must follow US policies because they have large businesses there.
Ellen Zimiles, chief executive of Daylight, which advises companies on compliance with OFAC and other laws, said: ” Non US institutions which operate in the US have to make sure their people have proper training and understand what the issues are.”
Barclays said it was carrying out its own internal review. It said the outcome was unlikely to have “a material adverse effect” on its finances.
Separately, Barclays said it was buying Russian lender Expobank for £373m in its first overseas acquisition since losing the bidding contest for ABN. The deal expands the empire of Frits Seegers, head of Barclays’ retail and commercial banking business.
Expobank, with one of the largest networks of cash machines in Moscow, has net assets of £93m.