MANHATTAN (CN) – Citing billions of dollars in trading with Cuba, government officials fined Societe Generale more than $1.3 billion Monday for violating U.S. sanctions.
From 2004 through 2010, the French bank filtered more than 2,500 transactions involving about $13 billion in Cuban money through 21 of its credit facilities in violation of the 100-year-old Trading With the Enemy Act.
Most of the transactions involved oil transactions between a Dutch commodities trading firm and a Cuban state-run company responsible for producing and refining the country’s crude oil, according to the criminal information filed this afternoon in Manhattan.
Authorities claim the transactions slipped under the radar due to Societe Generale filing inaccurate or incomplete notations on payment messages, sometimes rerouting the funds through Spanish banks and other financial institutions to hide the true origins of the funds.
federal investigators were tipped off to the illegal Cuban transactions after they began looking into Societe Generale transactions processed on behalf of a Sudanese sanctioned entity in March 2012. The bank disclosed those Sudanese transactions more than a year later.
The $1.3 billion fine — which will be paid to the Justice Department and the U.S. Attorney’s Office for the Southern District of New York, among other state and federal regulators — is considered the second largest ever imposed on a bank for violating U.S. economic sanctions.
The fine was levied under the Trading With the Enemy Act of 1917, which was passed during World War I to prevent American businesses doing business with Germany. With North Korea having been removed in 2008, the law today restricts only Cuba.
Societe Generale won’t have to pay the full $1.3 billion right away. Instead, authorities agreed to defer prosecution and most of the fines during a three-year probationary period, with the bank instead forfeiting only $712 million immediately.
As part of the probation deal the bank also will not be subject to prosecution for criminal tax violations.
“Other banks should take heed: enforcement of U.S. sanctions laws is, and will continue to be, a top priority of this office and our partner agencies,” U.S. Attorney Geoffrey Berman said in a statement.
Societe Generale CEO Frederic Oudea noted in a statement the bank has already taken a number of steps to comply with U.S. sanctions and anti-money laundering regulations.
“We acknowledge and regret the shortcomings that were identified in these settlements and have cooperated with U.S. authorities to resolve these matters,” Oudea said in the statement.
Societe Generale also agreed to pay an additional penalty of $95 million to New York state financial regulators for the Cuban transactions, as well as prohibited transactions to Iran, Sudan and Libya.
According to the consent order with the state, Societe Generale processed illegal U-turn transactions, in which the bank sped up the usual and legal process of filtering Iranian money through U.S. banks by making “cover payments” to divide the transactions and avoid U.S. regulator detection.
Societe Generale also assured its customers that it could reduce the impact of U.S. sanctions on such prohibited transactions, according to the consent order.
Maria Vullo, who heads New York State’s Department of Financial Services, lauded the fines but decried the lack of oversight that allowed Societe Generale to make the transactions in the first place. “The absence of an effective, global sanctions-compliance infrastructure and lack of management oversight allowed Societe Generale employees to ignore the scope and applicability of laws governing economic sanctions, as well as New York anti-money laundering and recordkeeping laws,” Vullo said in a statement.
Societe Generale began phasing out its Cuban business in 2004 after concerns grew about U.S. sanctions. But authorities say senior executives still worked to continue some of the business and were well aware of the illegal transactions.
According to the criminal information, one Societe Generale executive said in an email to several members of the bank’s senior management that “we have lived with the OFAC list for some time and have developed various methods of avoiding it.”
Despite winding down Cuban transactions, the bank continued the practice, with the knowledge of Societe Generale’s internal compliance group, until October 2010.
For the final transaction, Societe Generale allegedly instructed the credit facility to omit any mention of the Cuban corporation.
Societe Generale failed to tell investigators about the conduct or its Cuban credit facilities until October 2014. At that time, however, the bank did not disclose the existence of the Cuban Credit Facilities. It did so only in October 2014, after the bank performed a detailed forensic analysis based on the scope of investigation required by the government and the other investigating agencies.
The largest sanction to date against a financial institution for violating U.S. sanctions was levied in 2014 against Frank bank PNP Paribas, which was caught violating U.S. sanctions prohibiting transactions with Sudan.
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