Anti-Money Laundering & Counter Financing of Terrorism Practices Assignment, ICTA, Malaysia Describe the breaches of US sanctions committed by ABC in respect of the three (3) sanctioned countries

University International Compliance Training Academy (ICTA)
Subject Anti-Money Laundering & Counter Financing of Terrorism Practices

In early 2023. ABC Banking Corporation (ABC), a global financial institution has agreed to enter a guilty plea with the US authorities and consented to pay almost USD8 billion in order to resolve admitted violations of US sanctions against Sudan, Cuba, and Iran. ABC had admitted to unlawfully opening the doors of US financial markets to the three (3) sanctioned countries. It was the first time that a global bank had agreed to plead guilty to such large-scale and systematic violations of US sanctions.

This severe punishment by the US authorities was aimed at sending a clear message to other financial institutions around the world on the consequences of breaching US sanctions. As part of the settlement, the US authorities also required ABC to remove numerous executives, including its Chief Operating Officer, involved in the sanctions violations.

The guilty plea was a direct consequence of the US authorities’ strategy to identify major banks for possible money laundering and sanctions violations. In an unprecedented move, the US regulators also barred ABC for a year from conducting certain USD transactions, a critical part of ABC’s global business. In addition, the penalties imposed on ABC overshadowed any other previous actions taken for breach of sanctions.

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Through a series of sophisticated schemes to evade detection, ABC’s employees concealed billions of Dollars worth of transactions between 2012 and 2022 for clients from Sudan. Cuba and Iran were subject to US sanctions and embargoes. It was a clear violation of US regulations by providing Dollar clearing services to individuals and entities from these countries.

ABC deliberately disregarded US laws and placed its financial network at the service of these rogue nations, all for the purpose of generating more revenue. As a result. ABC helped them to gain access to the US financial system. The US authorities stated that these severe penalties were actions taken against ABC for its policy of profits first. despite knowing the official position of the US government on the violation of sanctions.

ABC went to great lengths to conceal prohibited transactions. covering its tracks and deceiving the US authorities. During the initial stage. ABC was contacted by Law Enforcement Agencies (LEAs) on its suspected breaches, but ABC chose not to cooperate.

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Most of ABC’s failures were related to transactions with their Sudanese clients. According to the US authorities, the bank essentially functioned as the ‘central bank’ of Sudan. The US government first imposed sanctions on Sudan in 1997 and had since strengthened them in 2006 because of Sudan’s support for terrorism and violations of human rights.

With the Sudanese clients, the bank admitted it set up elaborate payment structures that routed transactions through ‘satellite banks’ set up to disguise their origins. The internal memos of ABC revealed that bank officials were aware of the humanitarian and ideological crisis in Sudan.

Similarly, ABC provided Cuban-sanctioned entities with access to the US financial system by hiding their involvement in the payment messages. The US authorities also found that ABC had evaded sanctions against Cuba by stripping information linked to Cuban entities from the wire transfer messages for those payments; which were then resubmitted as lump sum payments in order to conceal them from the US regulators.

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As a result, these payment transactions could pass through the US system without raising any red flags. It would appear that ABC knowingly and wilfully processed such transactions in order to preserve ABC’s business relationship with the Cuban entities.

According to court documents, ABC was also engaged in more than USD800 million worth of transactions involving entities connected to Iran. These illicit transactions were done on behalf of ABC’s clients via a petroleum company based in Dubai that effectively acted as a front for the Iranians.

  • Describe the breaches of US sanctions committed by ABC in respect of the three (3) sanctioned countries.
  • Elaborate on the preventive measures that ABC need to take as a financial institution in order to comply with the requirements of the sanctions. Relate these preventive measures to the case study above.
  • Explain five (5) consequences for failure to comply with sanctions requirements. Support your answers by quoting actual reported cases.

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