Did British banks skirt U.S. sanctions?

Stephen Beard Jan 12, 2009

Did British banks skirt U.S. sanctions?

Stephen Beard Jan 12, 2009


Part of this report incorrectly identified one of the banks involved in the investigation. Lloyds TSB is involved. Lloyds of London is not.


TESS VIGELAND: As if the economic crisis and credit crunch weren’t bad enough for the banking sector, now comes word that some of them are looking the other way as money is funneled from questionable sources into the U.S. Several British banks, including the venerable Lloyds of London, are under investigation for helping customers in countries like Iran, Libya and Sudan get around U.S. sanctions.

Marketplace’s Stephen Beard joins us from the British capital. Hi, Stephen.


VIGELAND: So we’ve got these nine European banks that are said to be under investigation for violating sanctions. What exactly are they alleged to have done?

BEARD: Stripping, is what it’s called. We’re talking here about the practice of removing key details from an electronic money transfer to disguise where the money has come from. And it’s alleged a bunch of European banks have been doing this to break U.S. sanctions to send money from companies like Iran, Libya and Sudan into the United States without the U.S. banking system being able to detect where the money had come from.

VIGELAND: Well, without getting into the nitty gritty of it, how exactly does this work? Are they sending it from these countries through other countries and then into the U.S.?

BEARD: Yes, that’s precisely what they’re doing. And we don’t know too much detail at this stage of precisely how many different countries these transfers went through, or how much money is involved. But, we’re clearly talking about many hundreds of millions of dollars. I mean, in the one case which has emerged publicly now, Lloyds, a major British bank, has admitted that it illegally transferred $350 million, most of it from Iran into the U.S. banking system, using this technique to disguise where the money came from.

VIGELAND: So, if Lloyds has admitted $350 million and we’ve got eight other banks, we’re probably looking at billions.

BEARD: Exactly.

VIGELAND: For what purpose?

BEARD: We simply don’t know. I mean, we may know soon, however, because Lloyds has done a deal with the U.S. authorities so that none of its executives go to jail over this. They’re paying a fine — $350 million — but crucially they’ve also agreed to open up their records to the U.S. authorities so they can follow the money trail. They can find out where this money came from in Iran and where it wound up in the U.S.

VIGELAND: So, the natural question is whether this is part of the terrorism money trail. Is there any evidence that this cash has been funding terrorism, buying military equipment, anything of the sort?

BEARD: Well, again, the details are very hazy. But there are some signs of something sinister in connection with the inquiry. E-mails from Iran have emerged in which Iranian interests are seeking to buy huge quantities of tungsten. One order alone, apparently, was for 30,000 tons of the metal. Now, as I understand it, tungsten is used in the manufacture of long-range missiles, and it’s also used to make fridges. So, ask yourself: Why did Iran need 30,000 tons of tungsten — for fridges or for missiles?

VIGELAND: All right. I guess we’ll look forward to a possible answer on that question. Stephen Beard, talking to us from London. Thanks so much.

BEARD: OK, Tess.

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