http://havanajournal.com/business/entry/largest-ofac-settlement-in-history-619million-from-ing-bank/

HavanaJournal.com: Cuba Business

Largest OFAC settlement in history - $619million from ING Bank

Posted June 12, 2012 by publisher in Cuba Business.
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The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a $619 million settlement with ING Bank N.V. (“ING Bank”) to settle potential liability for apparent violations of U.S. sanctions.

Today’s settlement is the largest OFAC settlement of any kind to date.

The settlement resolves OFAC’s investigation into ING Bank’s intentional manipulation and deletion of information about U.S.-sanctioned parties in more than 20,000 financial and trade transactions routed through third-party banks located in the United States between 2002 and 2007, primarily in apparent violation of the Cuban Assets Control Regulations, 31 C.F.R. part 515 and other violations.

Long History of Banking Violations

In August 1994, ING Bank opened the Netherlands Caribbean Bank N.V. (“NCB”), a joint venture with Cuba. The Wholesale Banking Division of ING Bank (“ING Wholesale Banking”) also opened a representative office in Havana (“ING Havana”). ING Wholesale Banking’s branch in Curacao (“ING Curacao”) processed all payment instructions on behalf of, and performed support functions for, NCB and ING Havana.

Payment processing manuals developed at ING Havana and NCB instructed employees to give special attention to payment details for any name or company related to Cuba in order to avoid confiscation by unaffiliated U.S. banks. Senior management within ING Curacao, with the knowledge of ING Group Compliance and Legal, regularly reminded ING Curacao staff, by email and verbally, to avoid Cuba references in payment instructions. Staff members who failed to comply with the instructions were subject to oral reprimands, waning letters, or termination. NCB also provided instructions to its customers on sending U.S. dollar (“USD”) payments (which would have transited the United States) to their NCB accounts, directing the customers to: (i) reference NCB, and not the customer, as the beneficiary, (ii) make reference to the customer’s name or account number elsewhere in the same message and (iii) refrain from making any references to Cuba.

Beginning in 1998, ING Curacao employed a standard practice of screening information on payment instructions for Cuba-related references that might have resulted in wires becoming blocked in the United States. If the filter identified a reference to Cuba, ING Curacao, NCB, or ING Havana sometimes would modify the message to eliminate or camouflage the Cuban reference or other information that caused the “hit” before sending the payment to unaffiliated U.S. banks without references that would have caused U.S. financial institutions to identify transactions as involving a blocked Cuban interest. ING Curacao’s Documentary Trade Department also instituted a standard practice of sending settlement instructions to paying banks and clients requesting they mention only an ING Curacao reference number and not the names of the Cuban beneficiaries. At the instruction of senior management, ING Curacao employees used coded references to describe Cuba-related information that was sent to, or accessible by, ING Wholesale Bank’s representative office in New York.

Beginning in 2001, ING Curacao increasingly used MT 202 cover payments to send Cuba-related payments to unaffiliated U.S. banks, which would not have to include originator or beneficiary information related to C^ban parties. For serial payments, up until the beginning of 2003, NCB populated field 50 of the outgoing SWIFT MT 103 message with its own name or Bank Identifier Code, Beginning in the second quarter of 2W3, NCB populated field 50 with its customer’s name, but omitted address information. ING Curacao also included its customer’s name, but no address information, in field 50 of outgoing SWIFT messages. Additionally, while in 2004 the use of International Bank Account Number (“IBAN”) codes in field 50 of MT 103 payment messages was instituted across ING Bank, outgoing payments for non-Cuban customers of ING Curacao also included the customers’ names and addresses, whereas payments for Cuban customers of ING Curacao contained only the customers’ names and the IBAN. On multiple occasions when unaffiliated U.S. institutions successfully interdicted Cuba-related payments, ING Bank personnel, including management and a lawyer in ING Legal and Compliance, falsely stated to the U.S. institution that ING Curacao had intended to make the payment in another currency in an attempt to recover the finds.

In 20004, shortly after learning of this conduct, an employee in ING Wholesale Banking wrote in an email that ultimately reached ING’s Group Legal Department, in part:
There are several countries which are subject to sanctions by the US government… We must not carry out any transactions involving payments to or from entities in these countries denominated in US dollars, as all dollar payments are cleared through Manhattan and thus fall under US jurisdiction ... Any failure to observe this restriction could place ING in breach of US law.

An attorney in ING Group’s Legal Department was not receptive to this view, however, responding:

,.. we have been dealing with Cuba ... for a lot of years now and I’m pretty sure that we know what we are doing in avoiding any fines ... So don’t worry and direct any future concerns to me so that we can discuss before stirring up the whole business.

In addition to maintaining and distributing an explicit policy of omitting the name and BIC of Cuban banks in payment messages sent to the unaffiliated U.S. correspondent banks, ING Wholesale Banking’s branch in France (“ING France”) also provided a USD traveler check processing service to a Cuban bank. The service entailed the bank sending USD travelers checks to ING France without an endorsement stamp. Upon receiving the checks, ING France would then endorse the checks using an ING France endorsement stamp. In March and June 2000, the Cuban bank inquired about the creation of an ING France endorsement stamp for its own use on travelers checks from Cuba. A department head from ING France authorized the Cuban bank to create and use such a stamp. The Cuban bank manufactured the stamp with the advice of a senior manager at ING France and other personnel. There were no references to Cuba or the Cuban bank’s name on the stamp so that the Cuban involvement was not apparent. Rather, it appeared as if only ING France was, involved. In August 2004, ING France approved a similar procedure to process travelers checks for and issued a new stamp to a second Cuban bank. Although in 2003 and 2005, ING France’s Payment Department Audit Reports raised questions regarding the propriety of the practice of allowing a Cuban bank to use an ING France-style endorsement stamp, there is no indication that ING France acted on this information, or that the activity had ceased until at least 2006.

Athough understanding among employees at ING Wholesale Banking’s branch in Belgium (“ING Belgium”) varied regarding whether the use of cover payments differed from methods used to process non-OFAC sanctioned country payments, the employees, with the knowledge of senior employees in multiple ING Belgium departments, took care to ensure that there was no reference to OFAC-sanctioned countries in payment messages sent to the United States. The Head of ING Belgium’s Compliance Department stated that the use of cover payments in connection with payments involving OFAC sanctioned countries had been in place for about 40 years, beginning with Cuban transaction, and was subsequently used for transactions involving other OFAC-sanctioned countries. Awareness among employees at ING Belgium of this cover payment method was widespread and included, specifically, senior employees from the Financial Institutions, Payments, Documentary Trade, and Financial Markets departments.

ING Wholesale Banking’s branch in The Netherlands (“ING Netherlands”) used care not to include references to U.S. sanctioned countries in USD SWIFT messages because they believed doing so was necessary to avoid the payment being blocked by unaffiliated U.S. correspondent banks in accordance with OFAC regulations. ING Netherlands Trade and Commodity Finance business in its Rotterdam location (“TCF Rotterdam”) maintained USD accounts on behalf of Curef Metal Processing B.V. and Nickel Refining and Trading B.V., Cuban SDNs, and, from at least 1994 up to M06, employees of TCF Rotterdam processed transactions on behalf of these entities using suspense accounts and two other companies that were also clients of TCF Rotterdam and not listed on the SDN list. One of the non-SDN entities was used, with TCF Rotterdam management’s knowledge, to act as “a special purpose front office” for Curef for certain transactions. One TCF Rotterdam employee wrote that this arrangement was “Highly confidential.” This payment method was initiated to avoid the blocking of the clients’ USD payments by unaffiliated U.S. correspondent banks and implemented according to “standing instructions to the TCF Rotterdam back office.”

Furthermore, this practice was apparently known within ING Bank Legal, TCF Rotterdam Risk Management, and the relevant credit committees.

From on or about October 22,2002, to on or about July 6,2007, ING Bank processed 20,452 electronic finds transfers, trade finance transactions, and travelers checks in which Cuba had an interest, in the aggj-egate amount of $1,654,657,318, through financial institutions located in the United States in apparent violation of the prohibition against “[a]ll transfers of credit and all payment between, by, through, or to any banking institution or banking institutions wheresoever tolerated, with respect to any property subject to the jurisdiction of the United States,” 31 CF.R. ยง 515.201(a).

Read more about the OFAC ING Bank Settlement

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