COMMERZBANK AGREES TO PAY $1.45BN IN PENALTIES FOR SANCTIONS, FRAUD, AND MONEY LAUNDERING RELATED OFFENCES

On 12 March 2015, Commerzbank AG agreed to pay a total of $1.45 billion in penalties and enter into a three-year deferred prosecution agreement with the Department of Justice for doing business with Iran and other sanctioned countries, in addition to failing to have in place adequate money laundering and fraud controls.  Alongside forfeiture and fines levied by other bodies and regulators, $258.6m of the total penalty is due to the Department of Justice under an agreement with the US Treasury’s Office of Foreign Assets Control to settle potential civil liability for the apparent sanctions violations.

In the settlement agreement between OFAC and Commerzbank, the US Treasury states that between 2002 and 2010 “Commerzbank processed thousands of transactions through US financial institutions that involved countries, entities, or individuals subject to the sanctions programs administered by OFAC”, adding that Commerzbank employees “omitted references to Iranian financial institutions” and “created a process to route payments involving Iranian counterparties to a payment queue requiring manual processing by bank employees”.  It goes on to state that “Commerzbank utilized similar or other practices to process US Dollar transactions involving other sanctioned countries including Sudan, Burma, and Cuba, as well as other persons listed on OFAC’s list of Specially Designated Nationals and Blocked Persons”.

In a statement issued on 12 March 2015, US Assistant Attorney General Leslie Caldwell noted that “Commerzbank undermined the integrity of our financial system and threatened our national security by hiding the business they were doing with entities in Iran and Sudan”, warning that “Financial institutions must heed this message: banks that operate in the United States must comply with our laws, and banks that ignore the warnings of those charged with compliance will pay a very steep price”.

Commerzbank was also found to have failed to maintain adequate policies, procedures, and practices to ensure its compliance with US law, allowing a multibillion dollar securities fraud to be operated through it and Commerz New York.

Under the deferred prosecution agreement, if Commerzbank complies with its terms the US government has agreed to seek dismissal of the criminal charges after three years.  No individuals have been charged.

In June 2014, BNP Paribas agreed to pay $8.97bn in penalties for its own US sanctions violations (see previous blog here).

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About Michael O'Kane

Michael O’Kane is a partner and Head of the Business Crime team at leading UK firm Peters & Peters. Described as ‘first-rate’ (Legal 500 2012), he “draws glowing praise from commentators” (Chambers 2013) for handling the international aspects of business crime, including sanctions, extradition and mutual legal assistance. Called to the Bar in 1992 and prior to joining Peters & Peters he was a senior specialist prosecutor at the Crown Prosecution Service Headquarters(CPS). At CPS HQ he was a key member of a small specialist unit responsible for the prosecution of serious and high profile fraud, terrorist and special interest criminal matters including the Stansted Airport Afghan hijacking and the prosecution of Paul Burrell (Princess Diana’s butler). Michael joined Peters & Peters in 2002. He became a partner in May 2004, and Head of the Business Crime team in May 2009. Since joining Peters & Peters, Michael has dealt with a wide range of business crime matters. He has particular expertise in international sanctions, criminal cartels, extradition, corruption, mutual legal assistance, and FSA investigations. Described as“ an influential practitioner in fraud and regulatory work, so much so that he is top of the referral lists of many City firms for independent advice for directors” (The Lawyer’s Hot 100 2009), he was recognised as one of the UK’s most innovative lawyers in the 2011 FT Innovative Lawyer Awards and included in the list of the UK's leading lawyers in 'The International Who's Who of Asset Recovery 2012. In 2012 he was the winner of the Global Competition Review Article of the Year. Michael regularly appears on television and radio to discuss his specialist areas and he is the author of the leading textbook on the UK Criminal Cartel Offence “The Law of Criminal Cartels-Practice and Procedure” (Oxford University Press 2009). Recent/Current Sanctions Work • Representing 109 individuals and 12 companies subject to designation by the European Council under targeted measures imposed against Zimbabwe. This is the largest and most complex collective challenge to a sanctions listing ever brought before the European Court. • Acting for a former Egyptian Minister and his UK resident wife, challenging their designation by the European Council of Ministers under targeted measures brought against former members of the Egyptian Government. • Advising a company accused in a UN investigation report to have breached UN sanctions imposed in relation to Somalia. • Advising a UK company in relation to ongoing commercial relationships with an Iranian company listed under both EU and UN sanctions. • Advising an individual in relation to a UK investigation for alleging breaching nuclear export controls.

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