By Sara Munos Schaefer

December 23, 2009

Source:

LONDON—Lloyds Banking Group PLC on Tuesday became the latest bank to reach a settlement with American authorities over the handling of funds for countries under U.S. sanctions such as Iran.

The U.S. Treasury’s Office of Foreign Assets Control announced a $217 million settlement related to Lloyds’s “intentional manipulation and deletion” of information in wire-transfer instructions that were routed through third-party banks located in the U.S.

The $217 million fine won’t result in any new outlays for Lloyds. The government says the levy was included in a $350 million settlement reached in January with the U.S. Department of Justice and the New York County District Attorney’s Office. The January settlement was the result of a parallel investigation into the same batch of transactions.

Last week AG reached a $536 million settlement with the U.S., including the Department of Justice and the Treasury’s Office of Foreign Assets Control, for helping clients in Iran, Libya, Sudan and elsewhere conduct financial transactions in secret.

The penalties come as the U.S. is intensifying efforts to use the global financial system to pressure Iran into giving up its nuclear program as well as its support for international terrorism.

PLC is another U.K. bank involved in the investigation. The bank disclosed in its half-year results in August that the bank “has received inquiries relating to [U.S. economic] sanctions and certain U.S. dollar payments processed by its New York branch from the New York County District Attorney’s Office and the US Department of Justice” and is cooperating with the regulators,

A Barclays spokesman declined to comment.

The Lloyds investigation focused on policies that began in the mid-1990s when, with the knowledge of its Iranian bank customers, Lloyds developed a way to obscure information in its wire transfers, the Treasury said. The method in which Lloyds hid the transactions is a process known as “stripping.” That is the practice of removing wire-transfer information that would identify that transfers originated from a prohibited source.

The Treasury found that from June 2003 through August 2006, Lloyds routed at least 4,281 electronic funds transfers totaling nearly $37 million through third-party banks located in the U.S. The settlement came under the International Emergency Economic Powers Act and U.S. regulations related to Iran, Sudan and Libya, the Treasury said.

As part of Tuesday’s settlement, Lloyds will conduct annual reviews and audits for the next two years of the bank’s policies and procedures around U.S. dollar payments. The Financial Services Authority, the U.K.’s financial watchdog, will help create a third party to oversee the review.

A Lloyds spokeswoman said in a statement that the bank is “committed to running our business with the highest levels of integrity and regulatory compliance across all of our operations.”

Credit Suisse exited from the business in question, which employed several dozen people, in 2005. It did its own investigation and cooperated with authorities. The firm said last week that it “takes this matter very seriously.”