Memories of the way we were…

U.S. Persons….

U-Turns…. Memories of the way we were…

U.S. Persons….

The Beginning of the “Big Bank Cases”…

U-Turns…. ABN-AMRO USD80M Consent Agreement

DEC19 ‘05 = BRANCH ACTIVITY USD40M (OFAC & FED)/ USD80M TOTAL

ABN-AMRO Consent Agreement

HEADING THEM OFF AT THE PASS…

SEP 8 ‘06

NO MORE SADERAT U-TURNS

TARGETING…

JAN 9 ‘07

SEPAH & SEPAH INTL () = NPWMD

MORE TARGETING…

OCT 25 ‘07

SADERAT = SDGT

ARIAN, KARGOSHAEE, MELLAT, MELLAT (YEREVAN), MELLI, MELLI (MOSCOW) [MELLI ZAO, MIR BUSINESS BANK…], MELLI (LONDON), PERSIA INTL = NPWMD

TARGETING YET AGAIN…

MAR 12 ‘08

FUTURE BANK (BAHRAIN) = NPWMD

OCT 22 ‘08

EXPORT DEVELOPMENT BANK OF (EDBI) BANCO INTERNACIONAL DE DESARROLLO, C.A = NPWMD

BLOCKING THE PASS

NOV 6 ‘08

NO MORE U-TURNS

THE “BIG BANK CASES”

• Not simply “Causing U.S. Persons to violate!”

• Export of services from the United States

• Dealing in blocked property within the United States

Enforcement Guidelines – General Factors

A. Willful or Reckless Violation of Law

• Willfulness • Recklessness • Concealment • Pattern of Misconduct • Prior Notice • Management Involvement Enforcement Guidelines – General Factors

B. Awareness of Conduct at Issue

• Actual Knowledge • Reason to Know • Management Involvement LLOYDS – USD217M settlement – JAN ’09 & DEC ’09

• Obligation to pay satisfied by prior payment of USD350M to DOJ / DANY arising out of same pattern of conduct.

• Lloyds had a policy of intentionally manipulating & deleting information about U.S. sanctioned parties— involving Iran, Sudan, & Libya—in wire transfer instructions executed on behalf of its bank & non- bank customers.

• Substantial look-back regarding USD payments. Annual prospective review for 2 years w/ 3rd party; scope of review approved by the FSA.

MORE TARGETING…

NOV 5 ‘09

FIRST EAST EXPORT BANK (MALAYSIA) = NPWMD

CREDIT SUISSE – USD536M settlement – DEC ’09

• Global aggregate – OFAC, DOJ, DANY + FED C&D w/ FINMA assistance

• IEEPA / TWEA – Iran, Sudan, Cuba, Libya, Taylor‘s Liberia

• Aug ‗03 – Dec ’06 5,138 transfers c.USD645M thru US banks (not VSD)

• Sep „02 – Jun ’06 176 securities transactions c.USD152M London thru United States using code names (VSD)

CREDIT SUISSE – USD536M settlement – DEC ’09

“Credit Suisse used cover payments to avoid referencing parties subject to U.S. sanctions and omitted, removed, or provided incorrect information in payment messages to conceal the identities of U.S. sanctions targets in electronic funds transfers executed through the United States and in securities transactions executed in the United States.”

Total combined base penalty for all apparent violations = USD1.7 billion

TARGETING AGAIN…

JUN 16 ’09

POST BANK (IRAN) = NPWMD

“At one point, Post Bank‘s business was conducted entirely w/in Iran. Iran began using it to facilitate intl. trade in the wake of other designations. Post Bank actively stepped into the shoes of to carry out transactions set up by Bank Sepah & to hide Bank Sepah‘s involvement.”

AN INTERNATIONAL EFFORT (PART I)…

JUN 9 ’10

UN Security Council Resolution 1929

Among other things, called on “member states to prevent the provision of (including banking, insurance, and reinsurance), if there are reasonable grounds to believe that such services could contribute to Iran‘s nuclear or missile programs…”

CISADA - A NEW APPROACH

• Jul 1 ‘10, President Obama signed the “Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010”

• Numerous aspects to the statute including provisions related to the financial and the energy sectors (per ISA) CISADA Financial Sector Provisions

Section 104

• Restrictions on U.S. financial institutions opening or maintaining correspondent or payable-through accounts for foreign financial institutions

− Defined prohibited activities

− Defined prohibited parties

CISADA Financial Sector Provisions

• Focus is on current (post-signing) services, not the historic provision of services found in OFAC Enforcement cases.

• Not just USD… Any currency… Not just to or through the United States

• Importance of ―All Offices Worldwide‖

CISADA Financial Sector Provisions

CISADA Financial Sector Implementation

• OFAC - Iranian Financial Sanctions Regulations, 31 CFR Part 561 (Aug 16 ‗10)

• FinCEN/OFAC cooperation – in drafting rulemaking to implement Subsection 104 (e) - targeted

CISADA Financial Sector Provisions

– U.S. financial institutions cannot open or maintain correspondent or payable-through accounts for foreign financial institutions that the Secretary of the Treasury finds knowingly engage in certain activities described in the statute.

– As an alternative, Treasury may impose conditions on the operation of an account: e.g. audits, reports, certifications, due diligence controls…

– Sidebar: U.S. subs & their parents are liable for IRGC dealings

The IFSR

To be named under CISADA, a foreign financial institution must knowingly engage in one or more of the following:

– Facilitating the efforts of the GOI to acquire WMD, delivery systems for WMD, or provide support for terrorism; – Facilitating the activities of parties designated by UNSC; – Engaging in money laundering or facilitating efforts by any Iranian financial institution (including the ) to carry out such activities; – Facilitating a significant transaction or transactions, or providing significant financial services for the IRGC, any of its agents or any financial institution designated by OFAC under its WMD or Terrorism programs.

The IFSR What is “Significant?”

– Size, Number, and frequency – Type, complexity, or commercial purpose – Level of management approval – Pattern of Conduct or business development strategy – Economic significance to parties involved – Deceptive Practices – Other Relevant Factors – above are by way of example, determinations will depend on totality of facts & circumstances

CISADA Energy Provisions (ISA)

Section 102

– Threshold ISA triggers involving investment or commercial transactions related to Iran‘s Petroleum Sector reduced

– If a company meets criteria, the State Department must impose three or more of nine possible actions against the firm

– Waivers possible CISADA Provisions

Section 102 State ISA findings that could impact banks:

(3) Loans from US financial institutions totaling > $10,000,000 in any 12-month period unless involving activities to relieve human suffering

(6) Foreign exchange

(7) Banking transactions - transfers of credit or payments between financial institutions or by, through, or to any financial institution

(8) Blocking property & interests in property

(9) Prohibiting the importation of goods, services, or technology CISADA Other Provisions

U.S. imports from (exports to) Iran – Section 103 . ITR amendments published on Sep 28 „10: no more GL‟s to import food or carpets (except household goods/personal effects)

• Human rights abuses – Section 105 − Feb 11 „11: Iranian Human Rights Abuses Sanctions Regulations (31 CFR Part 562)

• Procurement Contracts – Section 106 . Persons who export technology to Iran if used to restrict information flows… AN INTERNATIONAL EFFORT (PART II)

Since the second half of ‘10 following upon UNSCR 1929, sanctions regimes have been adopted by EU, South Korea, Japan, Canada, Australia, Norway, Switzerland, and others w/powerful features: designations of IRISL & IRGC, prior authorization regimes requiring vetting of transactions, severe restrictions on export credits, formal or de facto prohibition on establishment of new branches of Iranian banks or home-country banks in Iran or of new correspondent relationships. BARCLAYS – USD176M settlement – AUG 18 ’10

• Global aggregate settlement = USD298M

• OFAC, DOJ, DANY

• Board of Governors of Federal Reserve System and NYSBD issue consent C&D with the FSA‟s assistance

• IEEPA / TWEA – Sudan, Iran, Burma, Cuba

• Aug ’02 – Sep ’06 1,285 transfers for USD112,695,000 through Barclays NY and other US banks (VSD)

BARCLAYS – USD176M settlement – AUG 18 ’10

“Barclays engaged in payment processes that prevented Barclays NY and other U.S. financial institutions from identifying the involvement of U.S. sanctions targets in funds transfers processed through the United States. Barclays‘ apparent violations arose out of practices designed to circumvent filters at U.S. banks installed to detect transactions in violation of OFAC regulations. This was done using cover payments to avoid referencing parties targeted by U.S. sanctions and omitting or removing information in payment messages in order to conceal the identities of U.S. sanctions targets … in electronic funds transfer instructions executed through the United States.” OFAC CONTINUES TO TARGET…

SEP 7 ‘10

EUROPAIESCH-IRANISCHE HANDELSBANK (EIH) = NPWMD

… AND AGAIN…

FEB 17 ‘11

BANK REFAH = NPWMD

TWENTY-ONE AND COUNTING….

MAY 17 ’11

BANK OF INDUSTRY AND MINE (OF IRAN)

= NPWMD

• BIM provided financial services for Mellat & EIH and allowed EIH to transfer deposits held for designated Iranian banks to an account at BIM in Iran… the account was then used as a conduit for payments & transactions back into Europe.

• Funds routinely moved from Mellat at BIM to EIH at BIM with EIH disbursing Euros to Mellat customers. Reuters – May 18 ’11

―Iran's cannot do business in Turkey as all Turkish banks have cut links with it due to US sanctions over 's nuclear programme, the head of the bank's Turkish unit, Younes Hormozi, said.‖

―Asked in a telephone interview if there were Turkish banks still doing business with it, Hormozi said: ‗There are none left unfortunately. That is, all banks have cut links with us as of today. We know this stems from America and we condemn it.‘‖ DECEPTIVE PRACTICES OF IRISL

• Designated in 2008… It has renamed & even repainted ships & changed the nominal ownership of vessels to hide their connection w/ the shipping co.

• Toward the end of ’10, Nigeria intercepted & seized an Iranian weapons shipment (incl. 13 containers of rockets & explosives labeled as building materials). Several Iranians in Nigeria sought refuge in the Iranian embassy there & a Nigerian court charged member of IRGC in the plot. IRISL FRAUD – SHIPPING DOCUMENTS

• The Dec ‘10 issue of Commercial Crime International (of the ICC-CCS) had an article about the ICC‘s International Maritime Bureau (IMB) helping to identify IRISL sanctions busting. It noted that shipments sometimes take place in a manner different from that recorded on shipping docs.

• OFAC, with help from U.S. banks, has identified a scheme aiming to hide the involvement of IRISL in shipping transactions by (1) using container prefixes belonging to other carriers; (2) omitting or listing invalid, incomplete or false shipper prefixes in shipping container numbers; and (3) naming fabricated ocean vessels on Bills of Lading and other shipping documents.

AN OFAC ADVISORY – MAR 31 ’11 THE WORLD TURNED UPSIDE DOWN

AN ’80s OFAC POSTER CHILD IN THE 21st CENTURY

BEYOND CISADA…

GETS HIS VERY OWN NEW PROGRAM…

Executive Order 13566:

Blocking Property and Prohibiting Certain Transactions Related to Libya

Feb 25 ‘11

FOR HIMSELF, FOR HIS CHILDREN…

AND FOR HIS GOVERNMENT… MUANMAR, INC. – THANK GOODNESS FOR TRANSPARENT SECURITIES! NOT… AND SYRIA…

HUMAN RIGHTS VIOLATIONS

REPRESSION FIVE AND COUNTING…

• EO Blocking Property of Senior Officials of the Government of Syria (05-18-11)​

• EO 13572 Blocking Property of Certain Persons with Respect to Human Rights Abuses in Syria (04-29-11)​

• EO 13460 Blocking Property of Additional Persons in Connection With the National Emergency With Respect to Syria (02-15-08)

• EO 13399 Blocking Property of Additional Persons in Connection With the National Emergency With Respect to Syria (04-26-06)

• EO 13338 Blocking Property of Certain Persons and Prohibiting the Export of Certain Goods to Syria (05-12-04)

What are we to do?

• Read OFAC’s Enforcement Guidelines… get a handle on CISADA… watch out for Iranian banks, IRISL, & the IRGC… look around you for Gaddafi… and other rogue regime assets… Tighten up your Compliance Procedures…

… and, for God‘s sake, be careful out there! »