Barclays Bank PLC OFAC Settlement: $176M (2010)

Barclays processed payments through financial institutions in the United States on behalf of parties subject to U.S. sanctions by purposefully using SWIFT payment messages in a manner intended to obscure the identities of OFAC-sanctioned countries and persons, and by removing information from SWIFT messages that indicated a sanctioned interest in those payments.

Beginning in at least the mid-1980s, in part at the request of correspondent banking clients in countries targeted by U.S. sanctions, Barclays circulated special settlement instructions for transactions processed to or through the United States. Starting in 1987, Bank Melli Iran instructed Barclays to process USD transactions referencing only Bank Melli's account number at Midland Bank PLC, without referencing Bank Melli's name. Barclays memorialized these instructions and, as early as the late 1990s, incorporated them into its List of Correspondents ("LoC"), which grew to cover multiple correspondent bank clients, with instructions to use cover payments when processing USD payments to the United States and to omit the names of U.S.-sanctions targets from payment messages.

Barclays also installed an interdiction filter at its payment center in Poole, UK, but then systematically circumvented it. When a payment was stopped, the relevant business unit could "decide whether to re-input the message without the offending text." The then-Senior Manager at the Poole center confirmed that if an MT202 contained beneficiary information that caused it to be stopped by the OFAC filter in the UK, that information was removed to ensure the payment would not be stopped when resubmitted, and that this was a "common practice" in the Bank. A supervisor also sometimes instructed operators to route payments involving sanctioned persons through a Barclays sundry account, causing field 52 (ordering institution) to appear as Barclays rather than the sanctioned party.

Employees raised concerns as early as 2001. Barclays' then-Compliance Director warned that internal procedures for Iran and Libya included "directions to make transfers in US dollars which circumvent constraints and breach OFAC sanctions" and that "[s]ubstantial reputational damage could be focused on the Group." A 2004 internal assessment noted that cover payments were "effectively a way of by passing sanctions." Barclays did not act on these concerns until 2006.

The apparent violations span four programs: - Burma: 46 electronic funds transfers totaling USD 490,549.85, from on or about July 29, 2003, to on or about May 31, 2006, in some cases to the benefit of persons listed in the Annex to Executive Order 13310, in apparent violation of 31 C.F.R. §§ 537.202 and/or 537.201. - Cuba: 61 electronic funds transfers totaling USD 6,711,798.95, from on or about October 10, 2002, to on or about November 16, 2005, in apparent violation of 31 C.F.R. § 515.201(a). - Iran: 3 electronic funds transfers totaling USD 60,062.41, from on or about August 30, 2002, to on or about December 14, 2004, in apparent violation of 31 C.F.R. § 560.204. - Sudan: 1,175 electronic funds transfers and trade finance transactions totaling USD 105,432,102.00, from on or about August 6, 2002, to on or about September 27, 2006, in apparent violation of 31 C.F.R. §§ 538.205 and/or 538.201.

The apparent violations were voluntarily self-disclosed to OFAC within the meaning of OFAC's Economic Sanctions Enforcement Guidelines. OFAC had not issued a penalty notice or Finding of Violation against Barclays in the five years preceding the apparent violations. Upon discovering the apparent violations, Barclays took prompt and thorough remedial action and provided cooperation to OFAC by conducting an extensive look-back review and providing well-organized information regarding the apparent violations in a timely fashion.

Barclays agreed to a settlement in the amount of USD 176,000,000 arising out of the alleged violations of IEEPA, TWEA, the Executive Orders, and the Regulations referenced in the Agreement. Barclays' obligation to pay this settlement amount to OFAC is satisfied by its payment of a greater amount in satisfaction of penalties assessed by U.S. federal, state, or county officials arising out of the same pattern of conduct.

Barclays' conduct illustrates the risk created when financial institutions install sanctions screening tools but then establish practices to remove flagged payment information and resubmit transactions, effectively transforming an interdiction filter into a sanctions evasion mechanism. Internal compliance warnings dating to 2001 explicitly identified that internal procedures for Iran and Libya included "directions to make transfers in US dollars which circumvent constraints and breach OFAC sanctions," yet Barclays did not act on these concerns until 2006.

As remedial measures, Barclays implemented a sanctions policy broadly prohibiting USD transactions with OFAC-sanctioned countries, adopted a revised and enhanced sanctions policy across all business areas, and developed a Group-wide comprehensive training program, reviewed by internal and external counsel, designed to provide targeted training according to staff function and role.

Under the Agreement, Barclays is required to conduct annual independent compliance reviews for two years covering its OFAC compliance policies, procedures, and a risk-focused sampling of USD payments. The reviews must be conducted by an independent consultant acceptable to the Supervisors and the FSA, in accordance with generally accepted auditing standards, with results submitted to OFAC, the Supervisors, and the FSA within 90 days of each anniversary date.

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