Continuing a crackdown on third-country banks in Cuba begun under the Bush Administration, the Obama Administration’s Office of Foreign Assets Control (OFAC) announced a record $619 million settlement with ING Bank N.V. over alleged violations of U.S. sanctions primarily against Cuba.
In a press release, OFAC boasted the deal with the Amsterdam-based bank was “the largest OFAC settlement of any kind to date.” The settlement, OFAC said, includes both its civil investigation and criminal investigations by U.S. prosecutors; ING will submit a report to OFAC over its handling of US dollar transactions.
ING’s mega-payment exceeds settlements of Swiss banks UBS, which paid $100 million in 2007, and Crédit Suisse, which paid $536 million in 2009 to the United States, both over allegations of violating U.S. sanctions against several countries, including Cuba.
The Bush Administration’s bank squeeze triggered the pullout of at least 10 large foreign financial institutions from Cuba in 2006-07, including that of ING.
A repentant ING chief said it won’t happen again.
“The violations that took place until 2007 are serious and unacceptable,” said Jan Hommen, CEO of ING Group, in a press release. ” The facts … describe a very different ING than the company we’re all working so hard for today.”
In contrast to loud official protests and antidote laws by European nations the U.S. Helms-Burton Act triggered in the 1990s, European governments and the European Union have been mum about the U.S. crackdown on foreign banks over Cuba. Canada’s conservative Harper administration said in 2007 it was up to Canadian banks to decide how they react to U.S. enforcement.
Even though the U.S. prosecution is centered on US dollar-related transactions, and although the European Union does not impose any economic sanctions on Cuba, the U.S. pressure and settlement was sufficient for the Dutch bank to categorically exclude the possibility of doing business with Cuba.
“ING Bank continues to believe that, for business reasons, doing business involving certain specified countries should be discontinued,” the bank said in its 2011 annual report. ING added it “has a policy not to enter into new relationships” with clients from Myanmar, North Korea, Sudan, Syria, Iran and Cuba, due “to a variety of EU, U.S. and other sanctions regimes.”
ING has major operations in the United States.
In its press release, OFAC accused ING of “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.” The transactions totaled $1.6 billion.
The OFAC press release said the alleged violations were primarily related to Cuba, but also to Iran, Myanmar, Sudan and Libya. Most of ING’s incriminated acts were related to U.S. dollars originating in Cuba that cleared via third banks based in the United States.
According to OFAC, beginning in the 1990s, ING employees in Curaçao began omitting references to Cuba in payment messages sent to the United States, in order to prevent U.S. financial institutions from identifying and interdicting transactions. The practice of removing and omitting references to Cuba was also used by French, Belgian and Dutch branches of ING Bank’s Wholesale Banking Division, in processing U.S. dollar payments and trade finance transactions through the United States.
Five years ago, ING shut down its Havana office and unwound its 50-percent shareholding in Curaçao-based Netherlands Caribbean Bank (NCB), a joint venture with two Cuban financial entities. Half a year earlier, OFAC had blacklisted NCB over its Cuba links.
The blacklisting of NCB, frequently used by state importer Alimport S.A. to pay U.S. shippers, had caused the holdup of four shipments of U.S. corn, phosphate and telephone poles in 2006.
An ING spokesman said in 2007 that the pullout was a “pure business decision.” According to foreign businesspeople in Cuba, ING lost a large chunk of its business with the island when Cuba redirected some of its nickel exports from the Netherlands to China.
To crack down on Cuba-related U.S. dollar transactions by third-country banks, OFAC has used Section 311 of the Patriot Act, which authorizes the U.S. Treasury Department to designate foreign banks that are of “primary money laundering concern.” Once OFAC tags a bank, it can be effectively cut off from the U.S. financial system.
Even so, OFAC hasn’t brought a single Section 311 enforcement case yet. The only formal acts so far have been a few isolated postings in the Federal Register, designating a handful foreign banks as a “primary money laundering concern.” None of them have been Cuba-related.
