More trouble as RBS is fined $100m for breaking US sanctions

The Royal Bank of Scotland has been fined by US regulators after allegations it violated sanctions prohibiting business dealings with Iran and other regimes.

by Elizabeth Anderson
Last Updated: 15 Jan 2014

A day after its finance director unexpectedly quit, RBS has been dealt another blow by being hit with a $100m (£62m) fine for breaching US sanctions with Iran, Burma, Cuba and other countries.

The 82% taxpayer-owned bank was found to have removed data when making payments that could have identified it was moving money to countries subject to international sanctions.

RBS instructed employees to list the name of a financial institution rather than its identifying codes on wire transfers, the Treasury Department said. This stopped the bank's payment system from automatically including references to Iran in the cover messages sent to US clearing banks.

From at least 2002 to 2011, the regulator said that more than 3,500 transactions involving Iranian and Sudanese entities passed through New York banks with a value of around $523m.

RBS employees in payment processing centres in the UK were given written instructions containing a step-by-step guide on how to create and route US dollar payment messages involving sanctioned entities through the US to avoid detection.

These instructions stated:

IMPORTANT: FOR ALL US DOLLAR PAYMENTS TO A COUNTRY SUBJECT TO US SANCTIONS, A PAYMENT MESSAGE CANNOT CONTAIN ANY OF THE FOLLOWING: 1. The sanctioned country name. 2. Any name designated on the Office of Foreign Asset Control (OFAC) restricted list, which can encompass a bank name, remitter or beneficiary.

In a statement, RBS said it ‘acknowledges and deeply regrets’ the failings, and that it had put aside almost $300m since 2010 to strengthen the bank's control environment on sanctions and to make sure it doesn’t happen again. The bank also said it had removed some of the individuals involved, including the head of global banking services for Asia, Middle East and Africa, and the head of the money laundering prevention unit for corporate markets.

The issues came to light after an internal investigation by RBS in 2010 into its historical US dollar payment processes and controls.

RBS is the latest UK lender to reach a settlement with the US, following Standard Chartered’s $674m fine and HSBC’s record $1.9bn fine for money laundering and sanctions violations.

Read more on UK banks’ woes at the editor’s blog here.

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