Korean bank to pay $86m for alleged US sanctions violations
South Korean lender Industrial Bank of Korea (‘IBK’) has agreed to pay $86 million in fines to Federal and US authorities to settle a probe into dollar transfers to Iran made by its New York branch (‘IBKNY’), that allegedly violated US sanctions. In return, authorities have agreed to defer criminal proceedings for two years.
At the heart of the case, say prosecutors, is IBKNY and IBK’s ‘failure to promptly identify a series of transactions that violated the United States’ economic sanctions against Iran’.
According to the authorities, in the first half of 2011, US citizen Kenneth Zong, along with (mostly Iranian) co-conspirators, ‘exploited bank accounts that had been established at IBK and at another bank to permit certain forms of trade between Korea-based entities and Iran, to transfer U.S. Dollars unlawfully to Iranian-controlled entities.
‘In order to evade U.S. sanctions, Zong and his co-conspirators set up shell companies in Korea, Iran, and elsewhere, which engaged in sham trade transactions and submitted fictitious documentation to Korean banks, including IBK, in order to facilitate the transfer of Iranian funds…IBKNY did not review and identify the Zong Transactions as unlawful until more than five months after they began to be processed through IBK, after IBK had already processed more than $1 billion worth of such transactions.’.
Authorities said on 21 April that IBK entered a two-year deferred prosecution agreement with the U.S. Department of Justice and a non-prosecution agreement with New York Attorney General Letitia James and will pay $35m to the New York Department of Financial Services to cover ‘various regulatory violations’.
The Justice Department said: ‘The Government entered into this resolution due, in part, to IBK’s acceptance and acknowledgement of responsibility under the laws of the United States for its conduct, as exhibited by its undertaking of a thorough internal investigation and transactional analysis, providing frequent and regular updates to the U.S. Attorney’s Office, collecting and producing evidence located in other countries to the full extent permitted under applicable laws and regulations, and making employees located in other countries available for interviews in the United States.’
