The global financial giant Deutsche Bank was fined $258 million for violating American sanctions against Iran, Syria, and other nations, The New York Times reported Thursday.
It is the latest in a string of settlements over sanctions violations as regulators take aim at banks for doing business with blacklisted countries. Still, criminal investigations by the Manhattan district attorney and the United States attorney’s office in Manhattan were continuing, people briefed on the matter said. …
The activity under investigation occurred from 1999 to 2006, according to regulators. Deutsche Bank handled 27,200 dollar-clearing transactions, valued at over $10.86 billion, for customers in Iran, Libya, Myanmar, Syria and Sudan. Regulators said bank employees had developed ways to hide the nature of the transactions from internal controls intended to flag problematic payments.
The regulators pointed to emails among various Deutsche Bank employees. One said, “Let’s keep this email strictly on a “need-know’ basis, no need to spread the news.”
According the Times, Deutsche Bank is one of several large European-based banks under investigation. Two French banks have also been forced to pay fines: Crédit Agricole agreed to pay $787 million, and BNP Paribas, France’s largest bank, paid $8.9 billion, a record.
The Times reported last year on how a lawsuit filed against Iran by Stephen Flatow, whose daughter was killed by Iranian-sponsored terrorists, led prosecutors to uncover the methods banks used to hide their dealings with Iran.
The prosecutors soon discovered that Credit Suisse and Lloyds, two of the world’s most prestigious banks, had acted as Iran’s portal to the United States financial system. To disguise the illicit transactions — the United States is closed for business to Iran — Credit Suisse and Lloyds stripped out the Iranian clients’ names from wire transfers to the Fifth Avenue charity and affiliated entities. The findings led the Manhattan prosecutors and the Justice Department in Washington to announce criminal cases against both banks.
In The Central Pillar Supporting the Iran Deal Has a Big Crack In It, which was published in the July 2015 issue of The Tower Magazine, Emanuele Ottolenghi explained that the banking sanctions against Iran were an important factor in getting Iran to negotiate.
It took years of patient and tenacious U.S. diplomacy to prod a reluctant international community into agreeing and then enacting the complicated sanctions regime in place since March 2007, when the United Nations Security Council approved Resolution 1737. In particular, getting the United Nations Security Council’s stamp of approval for non-proliferation sanctions proved extremely difficult. Though this approach eventually bore fruit—six binding resolutions under Chapter 7 of the UN Charter were approved between July 2006 and June 2010—it also showed its limits.
Since the Security Council passed the last of these resolutions, Russia and China have shown no desire to expand sanctions further. As a result, the measures that are most credited for bringing Iran into serious negotiations—the banking and financial restrictions passed between 2010 and 2012—were mainly autonomous U.S. and European Union sanctions. Globally, large corporations and financial institutions grudgingly went along with them. In addition, the painful fines inflicted on HSBC, BNP Paribas, and Standard Chartered had a chilling effect on the business world. Few dared question, let alone challenge the administration’s willingness to use economic pressure as its principal tool of coercive diplomacy. Who wants a $8.9 billion fine, after all?
Global compliance left Iran cut off from financial markets. Its energy sector rusted, while its oil sales plunged to a quarter of its production abilities. Its economy teetered on the brink of the abyss. But these achievements rested largely on three assumptions: The Obama administration was determined to enforce sanctions, come what may; America’s allies mostly supported or at least acquiesced to Washington’s punitive actions; and Iran had no effective recourse. Today, on the eve of a nuclear agreement, none of this is true any longer.
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