Judge criticises US over 'soft' fine for Barclays Bank

News from Cuba | Wednesday, 18 August 2010

by Andrew Clark in New York for The Guardian

Washington court criticises 'sweetheart deal' and $298m fine for bank that flouted international sanctions

A judge has attacked the US government for striking a "sweetheart deal" with Barclays to settle criminal charges that the British bank flouted international sanctions by doing clandestine business with Iran, Cuba, Libya, Sudan and Burma.

At a court hearing in Washington yesterday, judge Emmet Sullivan refused to rubber-stamp an agreement under which Barclays consented to pay $298m to settle charges that its staff deliberately concealed transactions with financial institutions in regimes frozen out by US foreign policy.

"Why isn't the government getting tough with the banks?" Sullivan asked, pointing out that no individuals were being charged or sent to prison over the breaches. The judge's unexpected resistance threw the settlement into doubt pending a more detailed hearing, scheduled for Wednesday.

Barclays is anxious to move beyond a scandal in which it owned up to sanctions-busting between 1995 and 2006. The bank has joined Lloyds TSB, Credit Suisse and ABN Amro among overseas financial institutions caught by US rules which cover them because they have branch operations in New York.

Plea bargains to settle criminal charges are common in the US and are often nodded through by the bench. But in the latest of several shows of judicial scepticism towards hasty settlements of Wall Street misdemeanours, Sullivan described the agreement as "an accommodation to a foreign bank" and pointed out that the average American caught robbing a bank is not given a deferred prosecution deal or an opportunity to refund the proceeds from crime.

Prosecutors say Barclays staff stripped identifying names from payment information in a deliberate ruse to defy US sanctions against repressive regimes, including countries accused of being state sponsors of terrorism.

Court documents say much of the subterfuge took place at a payment centre in Poole, Dorset, where an "interdiction filter" was installed to spot mentions of countries covered by sanctions. Once spotted, the wording on payments was changed to blur the source or direction of funds.

Among the challenged transactions are 46 fund transfers worth $490,000 involving Burma, 61 transactions worth $6.71m concerning Cuba, three payments amounting to $60,000 involving Iran and 1,175 transfers of $105m benefiting individuals or government entities in Sudan.

Lloyds TSB settled similar sanctions-busting charges in January last year by paying fines of $350m. Credit Suisse faced penalties of $536m and ABN Amro, now owned by RBS, forfeited $500m in May.

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