Royal Bank of Scotland fined £61m in the US for breaking sanctions

The Royal Bank of Scotland (RBS) has agreed to pay US regulators $100m (£61m) following allegations that the bank violated sanctions against Iran, Burma, Cuba and Sudan.

The settlement has been agreed with the US Federal Reserve, the US Treasury and the New York State Department of Financial Services. According to the US Treasury, RBS engaged in payment practices that interfered with the implementation of US economic sanctions by financial institutions in the US between 2005 and 2009.

“With respect to Iran, for example, RBS accomplished this by developing written procedures to send payments that omitted information about the Iranian nexus in cover payments sent to US financial institutions”, the US Treasury explained.

“The procedure instructed employees to list the actual name of the Iranian financial institution rather than the Bank Identifier Code in the beneficiary bank field of the payment.”

Using this method meant that the RBS payment system was prevented from automatically including references to the Iranian bank or Iran in related cover messages. This resulted in the omission of data from instructions sent to US clearing banks. Similar methods were used for payments involving Sudan, Burma and Cuba.

In addition, RBS employees in the UK are said to have received written instructions on how to create and route US dollar payment messages involving sanctioned entities through the US to avoid detection.

In a statement RBS said it “acknowledges and deeply regrets these failings”.

Adam Szubin, director of the US Treasury’s Office of Foreign Assets Control, said, “This action demonstrates our continuing efforts to aggressively enforce US sanction laws against Iran and other sanctioned parties.”

He added the move also underscored that the US regulatory community will ensure that the US financial system is protected from the risks associated with this type of “illicit financial behaviour”.

This year alone RBS has faced a number of fines for poor practices. The bank was fined £390m for its part in the Libor fixing scandal and is currently being investigated, but has yet to be fined, by the EU over allegations they rigged interest rates.

The banking regulator also fined RBS £5.6m in July for inaccurate transaction reporting. According to the outgoing chairman of UK Financial Investments in November, RBS could be implicated in another scandal relating to the US sub-prime mortgage crisis.

It was announced on Wednesday that Lloyds Banking Group was dealt a record £28m for “serious failings” in its control of sales incentives schemes and as a result encouraging an irresponsible sales culture.

Further reading:

‘Vital step’ in ending irresponsible banking as Volcker rule is approved by US regulators

Banking regulator deals Lloyds record £28m fine for irresponsible sales culture

RBS among eight major banks by EU over rate-rigging

Report on RBS reveals its ‘shocking treatment’ of UK businesses

Royal Bank of Scotland could face new scandal and additional fines