Lloyds forfeits £230m over US sanctions dodge

Matt Dickinson,Press Association
Saturday 10 January 2009 11:45

High street bank Lloyds TSB was 350 million dollars (£230m) poorer today after being penalised by US authorities for illegal financial transfers.

The group - which is set to be part-nationalised by the UK Government after merging with rival HBOS - was accused of helping customers in Sudan, Libya and Iran dodge US sanctions on business transactions.

The US Justice Department said yesterday that Lloyds TSB had acknowledged "criminal conduct" and agreed to forfeit the funds in return for an end to its investigation.

In a statement, the bank said: "We committed substantial resources to a thorough internal investigation, the results of which were shared with US investigators and regulators.

"We are committed to running our business with the highest levels of integrity and regulatory compliance across all of our operations and have undertaken a range of significant steps to further enhance our compliance programmes."

Lloyds TSB said it had set aside £180 million last year to cover any potential settlement in relation to the litigation and did "not anticipate any further enforcement actions" from the authorities.

US prosecutors said that the bank's misconduct took place between 1995 and 2007. The case against Lloyds grew out of an investigation into suspicious money transfers by alleged Iranian front companies and charities in New York.

Assistant Attorney General Matthew Friedrich said: "For more than 12 years, Lloyds facilitated the anonymous movement of hundreds of millions of dollars from US-sanctioned nations through our financial system."

After the 2001 terror attacks, the US intensified scrutiny of banks that might be moving money related to terrorists or rogue regimes.

As a result, according to court documents, Lloyds executives decided in 2003 to stop providing stripping services to Iranian banks with branches in England, though it continued to do so for four Sudanese banks until January 2007.

According to court documents, Lloyds removed information such as customer names, bank names and addresses so that money transfers could pass undetected through US banks.

This process - known as stripping - meant that more than 350 million US dollars that might otherwise have been blocked was processed by US institutions.

Lloyds TSB has agreed to forfeit half the penalty to the US and half to New York County.

In return, the Justice Department is recommending that charges against the bank be dismissed in two years.

Lloyds TSB's merger with HBOS is expected to be completed early this year. As part of the deal the new entity will accept a multi-billion pound cash injection from the Government.

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