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Tightening the nuke noose? Lloyds fined for helping Iranian banks evade sanctions

January 4, 2010

Over the holidays, the U.S. Treasury’s Office of Foreign Asset Control announced a settlement with Lloyds Banking Group for its role in channeling Iranian money through American banks.  (Or as one commenter put it, “English whorehouse Lloyds TSB Bank settles out of court.”)

Here’s how it worked:  banks in Iran, Libya, and the Sudan held accounts with Lloyds.  Then Lloyds allowed money from those accounts to be wired or transferred through U.S. financial institutions after stripping identifying information such as bank names, customer names, and addresses.

Naturally, Lloyds knew who their own clients were, and they knew they weren’t supposed to allow transactions through the U.S., which is why they stripped the information from the transactions.

Lloyds clients include:

  • Bank Melli, Iran
  • Bank Saderat, Iran
  • Bank Sepah, Iran
  • National Bank of Khartoum, Sudan

In allowing these transactions to take place, Lloyds violated the U.S. International Emergency Economic Powers Act.  The money may have benefited terrorism or furthered Iranian nuclear ambitions.  How?  For one thing, once the money was transferred, it could be put into the coffers of front companies to pay for “goods and services” (such as sensitive weapons, technologies, or other materials).

As I noted in my review of Out of the Ashes, a powerful case can be made against the effectiveness of economic sanctions on Middle Eastern dictatorships.  The news that major financial institutions such as Lloyds have allowed for the circumvention of the sanctions regime casts doubts on both the strategy behind the sanctions and the how the sanctions are being administered.

But, congratulations are in order for the New York DA’s office and OFAC for uncovering and penalizing the activity, and for making our sanctions regime slightly less sieve-like.

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