Aug 25 2009 Brett Wolf
Australia and New Zealand Bank Group has paid $5.8m to settle allegations that it deleted references to US-sanctioned Sudanese and Cuban entities from SWIFT payment messages before forwarding the messages to US correspondent banks. ANZ allegedly engaged in this conduct, commonly known as "stripping", between 2004 and 2006. In all, it stripped 31 messages related to trade finance transactions, according to statements issued by the US Treasury Department's Office of Foreign Assets Control and ANZ.
"ANZ actively manipulated the SWIFT messages related to the Sudanese transactions by removing references to Sudan or the names of entities subject to sanctions in the United States, thereby concealing the identities of the targets of US sanctions and impeding the ability of US banks to detect these violations," OFAC stated when announcing the deal.
The settlement reportedly covers 16 "stripped" transactions, totaling $28m, that allegedly violated Sudanese Sanctions Regulations (31 CFR Part 538), and 15 "stripped" transactions, totaling $78m, that violated Cuban Assets Control Regulations (31 CFR Part 515).
The use of the term "stripping" — with regard to the practice of removing all mention of sanctioned entities from SWIFT payment messages before forwarding them to Manhattan banks — has grown of late. In January, Lloyds TSB Bank agreed to pay $350m to US law enforcement agencies to settle claims it "stripped" messages to conceal the identities of banking clients in Iran and elsewhere. Of course, the practice first made headlines in December 2005, when OFAC fined Dutch bank ABN AMRO $40m.
Oddly, the $5.8m fine might be considered good fortune for ANZ. Late last year, sources in Australia reported that ANZ was expected to pay $20m to settle OFAC's allegations. When announcing the deal, OFAC said that it "mitigated the total potential penalty based on ANZ's substantial cooperation, its prompt and thorough remedial response, and the fact that ANZ had not been subject to an OFAC enforcement action in the five years preceding the transactions at issue."
"Although ANZ did not voluntarily self-disclose the apparent violations of the Sudanese Sanctions Regulations, ANZ substantially cooperated with OFAC by conducting an extensive review of transactions," OFAC stated. "This review identified additional apparent violations of the Sudanese Sanctions Regulations of which OFAC was not aware, as well as apparent violations of the Cuban Assets Control Regulations, which ANZ voluntarily self-disclosed to OFAC."
According to OFAC, ANZ also "re-engineered its current operating model to enhance its ability to identify and resolve operational gaps and weaknesses" and "enhanced key OFAC procedures and policies to establish more effective controls with respect to potential OFAC violations." It added that as part of the settlement, ANZ "has agreed to examine and, as necessary, further revise its policies and procedures to ensure, to the best of its ability, that transactions that would be in violation of OFAC's regulations are not processed by or through United States financial institutions."
"ANZ will report findings of its examination to OFAC. The Australian Prudential Regulation Authority, ANZ's primary Australian regulator, has agreed to review the results of the examination conducted by ANZ and monitor the resolution of any adverse findings," OFAC stated.
In a statement provided to Complinet, ANZ chief risk officer Chris Page said the bank "recognises that during the 2004 to 2006 period, the bank's compliance with US economic sanctions did not meet the high standards we expect".
"We've worked hard with regulators over the past three and a half years to comprehensively address the issues identified. This has included more robust policies and procedures, and a group-wide sanctions compliance training program for staff," Page stated.
