By Dominic Kennedy

Source:

October 15, 2010

BRITISH banks and financiers, including Lloyds and Barclays, helped Iran evade sanctions set up to prevent terrorism, the US said.

The sanctions were also put up to promote Middle East peace and stop the ayatollahs gaining nuclear weapons.

Investigations by prosecutors from the US Department of Justice found that Lloyds and Barclays helped the Iranians to access up to $US600 million ($604m) in the US financial system by hiding customers’ identities.

Lord Lamont of Lerwick, the former Chancellor, is on the board of a British trading house that was subjected to a civil penalty for breaching US sanctions by helping Iran to get banned American aircraft.

The Conservative peer remains chairman of the British Iranian Chamber of Commerce, which is supposed to advise businesses on how to comply with international trade restrictions against Tehran. His spokesman said: “Lord Lamont has not done anything wrong and has not been accused of any wrongdoing.”

Britain’s role as a useful location for breaching the US financial and trade blockade of Iran emerged as Europe imposed its toughest sanctions yet against the Islamic Republic.

The financial sector shoulders the main burden of enforcing the restrictions, which include freezing assets of individuals and entities implicated in the suspected nuclear arms program.

To put pressure on Tehran, insurance services to Iran are being banned and investments in its oil industry and trading in bonds are forbidden.

Only financial transactions worth less than €10,000 ($14,170) to and from the Islamic Republic will be permitted and those exceeding €40,000 must be approved by authorities in Europe.

Details of the British financial sector’s willingness over the years to help the Iranians to dodge sanctions have emerged from US court documents seen by The Times.

Two of Britain’s biggest banks had to negotiate with the US Department of Justice’s Asset Forfeiture and Money Laundering Section after being accused of breaching the restrictions.

Lloyds last year accepted that it had falsified up to $US350m worth of payment messages for transactions involving Iranians and Sudanese from the mid-1990s.

At the behest of, and with the knowledge of, its Iranian bank customers, Lloyds developed a policy of intentionally manipulating and deleting information about sanctioned countries, individuals and entities.

In the US, Acting Assistant Attorney-General Matthew Friedrich said the Department of Justice would “continue to use criminal enforcement measures against the knowing and intentional evasion of US sanctions laws, particularly where such conduct has the potential to finance terrorist activities”. Lloyds had to forfeit the $US350m.

Barclays two months ago forfeited $US298m over transactions that amounted to breaches of the Trading with the Enemy Act and International Emergency Powers Act. The bank followed instructions from banks in Iran and other sanctioned countries to leave their names out of US-dollar payment messages.

The agreement, which means Barclays should avoid prosecution, was attacked by US District Judge Emmet Sullivan, who heard the case. The judge said it was shocking that no individual had been identified over a crime. “The public looks at this and says, ‘They get a free ride here. They are paying for their justice’,” he said.

Lord Lamont is on the board of Balli Group, based in London, which was subjected to a $US15m penalty for conspiracy and breaching a trade ban over the provision of three US jumbo jets to Iran.

The Boeing 747s, worth $US140m, became available when United Airlines went bankrupt after the September 11, 2001 attacks. The Iranian authorities wanted the aircraft amid the sanctions.

The European Union, traditionally Iran’s biggest trading partner, is now putting the final touches to the toughest sanctions it has imposed on the Islamic Republic. The package, being negotiated this week and due to be implemented by October 28, prevents European companies from investing with Iranians in oil and gas, bans cargo flights and forbids trade in items that could help the nuclear industry.

US curbs on Iran date back to the Islamic revolution of 1979 when militants besieged the US Embassy in Tehran and held hostages for 444 days. The US President of the time, Jimmy Carter, froze Iranian assets. In the 1990s, Bill Clinton imposed a near-total ban on trade when he was President.

The rest of the world failed to follow America’s example until 2006, when the UN became alarmed at the military potential of Iran’s nuclear enrichment program.

UN sanctions have targeted Iran’s atomic capability, leaders of the Revolutionary Guards, shipping, money laundering and finance for terrorism.

Dubai is a weak link in international efforts to maintain a stranglehold on the Iranians. The United Arab Emirates is Iran’s largest source of imports. Goods intended for Iran are sent to Dubai, then re-exported to the Islamic Republic.

Until recently, Britain encouraged dealing with the Iranians. Last year, though, relations chilled when the agency UK Trade & Investment left Tehran, withdrawing practical support for British companies doing business in Iran. Now London is discouraging businesses from dealing with the Iranians. Will that be enough to stop entrepreneurial Britons seizing opportunities to work with Tehran though?

A well-informed observer said: “There is a problem of perception. In Iran, everybody is happy about getting new goods. In America, it appears to go against foreign policy. In London, it’s just business.”