A Pattern of Abuse in the International Financial System?

August 17th, 2010

Photo: Ian Britton,

Yesterday, it was announced that Barclays PLC would pay the U.S. Government $298 million to settle a case charging the British bank with blatantly disregarding U.S. sanctions against countries such as Burma, Cuba, Iran, Libya, and Sudan.  In doing so, the bank both accepted and acknowledged the charges made against it, and—according to the The Wall Street Journal—took full “responsibility for its conduct and that of its employees.”

The details of the case are fairly disturbing, highlighting a culture of complete disregard for U.S. regulations.  The Journal reports:

U.S. officials said the bank altered payment messages or deleted information about sanctioned countries.

In other cases, Barclays returned payments out of fear they would be detected by U.S. officials, sending fax cover sheets that said: “Payments to U.S.A. must NOT contain the word listed below.” Prosecutors said payments often were re-sent after references to the sanctioned countries, which included Sudan and Myanmar, were omitted.


According to U.S. prosecutors, Barclays followed instructions from foreign banks to omit their names from payment messages. Barclays also routed certain payments through an internal account so they would appear to be coming from Barclays rather than a bank in Iran or Cuba.

In an internal manual, Barclays included instructions for processing payments to the U.S. from foreign banks to avoid detection. Payments going to the New York branch were filtered before they left Britain to prevent “the seizure of funds in the USA,” according to an employee email cited in a federal-court filing.

In one email referenced by prosecutors, an employee wrote about how to avoid detection: “A good example is Cuba which the US says we shouldn’t do business with but we do.”

This would be bad enough if it were just Barclays who engaged in this sort of behavior.  Unfortunately, this is only one more case in a long series of probes exposing illicit behavior by international financial institutions.  Again, according to the WSJ:

In May, ABN Amro, now part of Royal Bank of Scotland Group PLC, agreed to pay $500 million to end allegations that it helped Iran, Libya, Sudan and Cuba evade U.S. sanctions by “stripping” the identities of transactions to conceal the countries from which they originated.

Last December, Credit Suisse Group paid $536 million to settle similar violations involving transactions with Iran. In early 2009, a unit of London-based Lloyds Banking Group paid $350 million related to similar charges by federal and New York prosecutors, who accused the bank of masking the origin of payments from Iran and Sudan.

Is it just me, or are we starting to see a pattern?  With so many prominent international financial institutions engaging in nefarious practices to essentially launder money, shouldn’t we ask ourselves whether there’s something wrong with the structure of our financial system?  Isn’t it time we introduced a little more transparency into the process?

Written by Clark Gascoigne

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