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Lloyds Bank Pays $350 Million and Agrees to Deferred Prosecution for US Sanctions Violations, Other Banks May Follow

January 29, 2009
DOWNLOAD PDF: Lloyds Bank Pays $350 Million and Agrees to Deferred Prosecution for US Sanctions Violations, Other Banks May Follow

Lloyds TSB Bank plc must pay $350 million for violating US economic sanctions laws. The penalties were imposed as a result of "deferred prosecution agreements" entered into on January 9, 2009. The underlying conduct involved "stripping" information from US dollar payment instructions that would have revealed to US banks that USD payments originated by Lloyds were for certain of its Iranian and Sudanese customers. This conduct, according to the charges, resulted in willful exportation of services from the United States to Iran and Sudan, which is prohibited by US economic sanctions regulations. The severity of the penalty in this case demonstrates that financial institutions, including non-US institutions that avail themselves of the US payment systems, must establish effective compliance programs to prevent these types of situations.

"Deferred Prosecution Agreements" ("DPA") permit putative defendants in criminal matters to avoid charging and/or conviction by agreeing to financial penalties and certain standards of conduct for a specified period. Such agreements often require that the subject entity employ an independent outside monitor or consultant to report to the authorities on compliance with the terms of a DPA. Lloyds has agreed as part of its DPA to employ an independent consultant approved by the NY County District Attorney's office to review and report on five years of transactions.

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