UniCredit to Pay $1.3 Billion, Plead Guilty to US Sanctions Violations
16 Apr 2019

A UniCredit Group affiliate bank will plead guilty to US federal and state criminal violations and pay $1.3 billion to regulatory and prosecutorial agencies to resolve breaches of sanctions against Iran and other nations, officials disclosed.

Under terms of a non-prosecution agreement with the US Justice Department, the group’s German affiliate, UniCredit Bank AG, will plead guilty to a one-count felony criminal information in the District of Columbia for processing hundreds of millions of dollars in transactions on behalf of Iran’s state-owned maritime fleet, the Islamic Republic of Iran Shipping Lines (IRISL).

The Munich-based affiliate, which operates under the name HypoVereinsbank, will separately enter guilty pleas on Tuesday to New York State charges that it falsified business records and conspired to move the prohibited funds through Manhattan banks.

The guilty pleas come as part of a larger global settlement announced Monday to resolve sanctions violations by its banking units in Germany, Austria and Italy. All together, UniCredit will pay various US regulatory and law enforcement agencies $1.3 billion for illegally processing payments for clients in Myanmar, Cuba, Libya, Sudan, Syria and Iran.

“The banks have cooperated with the US and New York authorites in their investigations for many years, including sharing the results of extensive internal investigations,” UniCredit Group said in a statement. UniCredit has also “voluntarily implemented a major group-wide and bank-specific remediation  and enhancement plan to strengthen” its compliance controls, according to the statement.

The settlement stems from a 2011 investigation by the Manhattan District Attorney’s Office and cites infractions over a 9-year span that began in 2002.

For much of that time, the bank’s senior managers were not only aware of the violations but sought to conceal them in order to continue processing transactions, including for IRISL, which the US Office of Foreign Assets Control (OFAC) blacklisted as a proliferator of weapons of mass destruction in 2008.

Following the designation, which had been flagged by bank compliance officers and reviewed by its management, UniCredit AG executives internally distributed “a guide that provided step-by-step instructions for handling transactions in an ‘OFAC neutral manner,’” according to the Treasury Department agency.

The guide, which was intended to help UniCredit bankers to circumvent the group’s own compliance controls as well as those of correspondent institutions, directed employees to consider cancelling payments that had been flagged for potential sanctions violations and rerouting them instead through non-US financial institutions, at which point they could be sent to an American bank without referencing the payment originators, OFAC said.

In other instances, UniCredit payment operators were told that they must excise or omit incriminating data from interbank payment messages sent via the SWIFT payment protocol—a process known as “wire stripping.” Under a third option included in the guide, UniCredit employees asked clients to resubmit their payments so that they were “not objectionable with regard to OFAC,” according to the agency.

UniCredit Bank Austria separately processed payments in violation of sanctions against Cuba, Myanmar, Syria, Sudan and Iran, and attempted to conceal the transactions from third-party banks by exploiting so-called “cover payments” within the SWIFT platform, OFAC said.

UniCredit Bank S.p.A. likewise concealed prohibited transactions by omitting data from cover payment messages, and opened an account for Bank Sepah at the behest of the Italian government, despite knowing that the Iranian financial institution had been blacklisted by the United States, United Nations and European Union, according to the New York State Department of Financial Services.

Under terms of the various settlements, the UniCredit affiliates must bolster their related compliance controls and procedures.

The deal follows the announcement last week of a $1.08 billion global settlement between Standard Chartered Bank and US and UK authorities for similar sanctions lapses as well as British anti-money laundering regulatory failures. Under that arrangement, the London-based lender will remain in a deferred prosecution agreement with the Justice Department through April 2021.

Read more:

DOJ: UniCredit Bank AG Agrees to Plead Guilty for Illegally Processing Transactions in Violation of Iranian Sanctions

OFAC: Settlement Agreements between the U.S. Department of the Treasury’s Office of Foreign Assets Control and UniCredit Group Banks

New York State: DFS Fines UniCredit Group $405 Million for Violations of Sanctions Laws

New York City: Unicredit Bank AG to Plead Guilty and Pay $316 Million to DA’s Office Related to Illegal Transactions on Behalf of Nuclear Weapons Proliferator

Federal Reserve fines UniCredit $158 million for firm’s unsafe and unsound practices related to inadequate sanctions controls and supervision of subsidiary banks

 

 

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