DA VANCE ANNOUNCES $342 MILLION SETTLEMENT WITH COMMERZBANK | The New York County District Attorney's Oce

2015-03-12, 12:23 PM

Press Releases
DAs Office and Federal Partners Have Secured Close to $12 Billion in Settlements From 8 Banks Since
2009
Manhattan District Attorney Cyrus R. Vance, Jr., together with the U.S. Department of Justice (DOJ),
today announced the resolution of a joint investigation into the criminal conduct of Commerzbank AG
(Commerzbank), the second-largest bank in Germany, and the payment of $342 million in penalties and
forfeiture to resolve the matter. In the Deferred Prosecution Agreement (DPA) and corresponding Factual
Statement, Commerzbank admitted that it violated New York State law by falsifying the records of New
York financial institutions.
Beginning in 2002, Commerzbank moved more than $250 million through the U.S. financial system
primarily on behalf of Iranian and Sudanese customers in violation of U.S. sanctions by concealing the
illegal nature of these transactions and deceiving U.S. banks into processing illegal wire payments. One of
these customers was the Islamic Republic of Iran Shipping Lines (IRISL), the Iranian state-sponsored
shipping company, which the Office of Foreign Assets Control of the United States Department of the
Treasury (OFAC) designated as a Specially Designated National (SDN) pursuant to the Non-Proliferation
of Weapons of Mass Destruction program (NPWMD) in September 2008.
In June 2011, the Manhattan District Attorneys Office announced a 317-count indictment against IRISL,
at the time one of the worlds largest shipping companies, and several of its agents and affiliates. The
indictment charged that between September 2008, when IRISL was designated by OFAC, and January
2011, IRISL and its agents and affiliates engaged in a complex conspiracy to circumvent United States
sanctions and gain illegal access to the U.S. financial system by systematically falsifying records and using
front companies to move more than $60 million in illegal payments through New York banks. The current
investigation uncovered that, simultaneously, between September 2008 and December 2008, IRISL and
its agents and affiliates, aided by Commerzbanks branch in Hamburg, Germany, illegally transmitted
approximately $40 million through banks located in New York County after IRISL was designated as an
SDN.
We have sanctions in place to prevent rogue nations and terrorists from accessing the U.S. financial
system, said District Attorney Vance. In order to have teeth, sanctions need to be enforced and
Manhattan financial institutions need to be protected from being unwittingly used by bad actors. Over the
course of eight settlements, my Office and our partners have sent a strong message of enforcement that

http://manhattanda.org/press-release/da-vance-announces-342-million-settlement-commerzbank

Page 1 of 5

DA VANCE ANNOUNCES $342 MILLION SETTLEMENT WITH COMMERZBANK | The New York County District Attorney's Oce

2015-03-12, 12:23 PM

has led to the transformation of compliance in this area.

Assistant Attorney General Leslie R. Caldwell of the Justice Departments Criminal Division said:
Commerzbank concealed hundreds of millions of dollars in transactions prohibited by U.S. sanctions
laws on behalf of Iranian and Sudanese businesses. Commerzbank committed these crimes even though
managers inside the bank raised red flags about its sanctions-violating practices. Financial institutions
must heed this message: banks that operate in the United States must comply with our laws, and banks
that ignore the warnings of those charged with compliance will pay a very steep price.
U.S. Attorney Ron C. Machen Jr. for the District of Columbia said: Sanctions laws are designed to protect
the national security of the United States and promote our foreign policy interests. Commerzbank
undermined the integrity of our financial system and threatened our national security by hiding the
business they were doing with entities in Iran and Sudan. The bank tried to skirt our laws by hiding its
illegal business with Iranian banks from its own employees in the United States. Todays resolution
demonstrates that there will be consequences when global banks try to profit from the benefits of the U.S.
financial system without respecting our laws.
Chief Richard Weber of the Internal Revenue Service Criminal Investigation (IRS-CI) said: Todays
deferred prosecution agreement is a significant milestone on an international stage that reaffirms our
clear message to other global financial institutions. IRS-CIs work in this investigation as well as the
prior sanction cases has resulted in fundamental changes in the way banks operate worldwide. IRS-CI
and our partners will continue to hold financial institutions accountable for international criminal
violations.
In addition to the $342 settlement resolving the joint criminal investigation conducted by the Manhattan
District Attorneys Office and DOJ, Commerzbank also has agreed to resolve parallel regulatory inquiries
arising out of the same pattern of conduct, in which the Board of Governors of the Federal Reserve System
(Federal Reserve) and the New York State Department of Financial Services (DFS) imposed additional
civil monetary penalties in the amounts of $66 million and $310 million, respectively. The total settlement
amount of $718 million also includes a settlement of $260 million, reached with OFAC, with this amount
being credited to the total penalties and forfeiture amount. Further, Commerzbank has agreed to
simultaneously settle a BSA/AML matter with the federal government, the Federal Reserve, and DFS in
the amount of $734 million.
Included in the $342 criminal settlement amount is an unprecedented fine of approximately $80 million
specifically addressing Commerzbanks conduct with respect to its involvement in handling payments on
http://manhattanda.org/press-release/da-vance-announces-342-million-settlement-commerzbank

Page 2 of 5

DA VANCE ANNOUNCES $342 MILLION SETTLEMENT WITH COMMERZBANK | The New York County District Attorney's Oce

2015-03-12, 12:23 PM

behalf of IRISL after it was designated as an SDN by OFAC pursuant to the NPWMD program on
September 10, 2008. Because Commerzbank processed approximately $40 million in illegal payments on
behalf of IRISL after its designation as an SDN, Commerzbank has agreed to forfeiture and a criminal fine
in the amount of three times the value of those transactions approximately $120 million in total.
Pursuant to the DPAs with the Manhattan District Attorneys Office and DOJ related to sanctions
violations, Commerzbank has agreed, among other things, to adhere to best practices for international
banking transparency, implement procedures and training designed to ensure U.S. sanctions compliance,
and pay $342 million in penalties and forfeiture. Half of that amount, $171 million, will be paid to the
Manhattan District Attorneys Office and then distributed pursuant to New York State Law. The other half
will be paid to the United States.
Background
The U.S. government restricts certain countries including Iran, Sudan, Cuba, Burma, as well as entities
and individuals from those countries from accessing the U.S. banking system. OFAC is charged with
administering these economic sanctions against targeted foreign countries and regimes, terrorists,
international narcotics traffickers, those engaged in activities related to the proliferation of weapons of
mass destruction, and other threats to the national security, foreign policy, or economy of the United
States. Sanctioned financial institutions, countries, and individuals generally are prohibited from
accessing the U.S. financial system.
Banks in Manhattan, which process most of the worlds U.S. dollar payments, use sophisticated computer
systems commonly known as OFAC filters to prevent sanctioned entities, as well as terrorists, money
launderers, and other criminals, from gaining access to the U.S. banking system. These OFAC filters act as
the first line of defense to protect the U.S. financial system. Commerzbank helped its sanctioned clients,
predominantly from Iran and Sudan, evade U.S. banks OFAC filters to illegally gain access to the U.S.
financial system.
Commerzbanks Conduct
As detailed in the DPA and Factual Statement, beginning in or around January 2002 and continuing
through 2008, Commerzbank systematically violated both New York State and U.S. laws by moving
hundreds of millions of dollars illegally through banks in Manhattan primarily on behalf of Iranian and
Sudanese clients subject to U.S. sanctions. Commerzbank committed this criminal conduct by, among
other things: (1) sending payments through financial institutions located in New York on behalf of
sanctioned clients without reference to the payments origin; (2) eliminating payment data that would
http://manhattanda.org/press-release/da-vance-announces-342-million-settlement-commerzbank

Page 3 of 5

DA VANCE ANNOUNCES $342 MILLION SETTLEMENT WITH COMMERZBANK | The New York County District Attorney's Oce

2015-03-12, 12:23 PM

have revealed the involvement of sanctioned entities; (3) directing IRISL, an Iranian client of
Commerzbank since 2002, to transfer payments in the name of its subsidiary companies to mask IRISLs
involvement; (4) issuing checks to an Iranian client that showed only Commerzbanks name, and not the
name of the Iranian bank; and (5) using alternative payment methods to mask the involvement of
sanctioned entities.
This conduct caused Commerzbanks own U.S. branch in New York, as well as unaffiliated U.S. financial
institutions, to process transactions that otherwise should have been rejected, blocked, or stopped for
investigation pursuant to OFAC regulations. This conduct primarily occurred within Commerzbank
locations in Germany, with the knowledge and approval of senior corporate managers and legal and
compliance departments. These prohibited U.S. dollar payment transactions violated New York State
laws by causing false payment messages to be filed with entities located in Manhattan, thereby concealing
the illegal nature of these transactions, deceiving U.S. banks into processing the illegal payments, and
preventing them from filing required sanctions-related reports.
While todays DPA was designed to impose a substantial punishment on Commerzbank and send a strong
message of deterrence to other banks, important mitigating factors led to the agreement to defer
prosecution. Those factors included the fact that Commerzbank cooperated throughout the investigation
and devoted significant resources to both its internal investigation and the investigations conducted by the
District Attorneys Office and DOJ. Commerzbank also fully acknowledged and accepted responsibility for
its conduct, and voluntarily undertook a series of remedial actions before entering into the DPA.
Moreover, Commerzbank exited the sanctioned entity clearing business voluntarily before being contacted
by the Manhattan District Attorneys Office.
Prior Sanctions Cases
In June 2014, BNP Paribas Bank (BNPP) pleaded guilty in New York County to falsifying business records
and conspiring to evade U.S. sanctions and paid a record $8.83 billion in criminal forfeiture and penalties.
Since 2009, eight banks, including BNPP and Commerzbank, have forfeited in settlements approximately
$12 billion for their illegal conduct, with half of the funds being paid to the City and State of New York.
The Manhattan District Attorneys Office previously has entered into Deferred Prosecution Agreements
with the following financial institutions related to U.S. sanctions violations:
HSBC Bank for $375 million in 2012
Standard Chartered Bank for $327 million in 2012
ING Bank for $619 million in 2012
http://manhattanda.org/press-release/da-vance-announces-342-million-settlement-commerzbank

Page 4 of 5

DA VANCE ANNOUNCES $342 MILLION SETTLEMENT WITH COMMERZBANK | The New York County District Attorney's Oce

2015-03-12, 12:23 PM

Barclays Bank for $298 million in 2010

Credit Suisse AG for $536 million in 2009
Lloyds TSB Bank for $350 million in 2009
Acknowledgements
The four-year investigation was conducted jointly with the National Security and Frauds Sections of the
United States Attorneys Office for the District of Columbia, the DOJ Asset Forfeiture and Money
Laundering Section (AFMLS), the Federal Bureau of Investigation (FBI), and the United States Internal
Revenue Service Criminal Investigation (IRS-CI). District Attorney Vance recognized the substantial
contributions of the Federal Reserve Bank of New York and OFAC, which conducted their own
investigations.
The Commerzbank case was investigated and prosecuted by Assistant District Attorneys Garrett Lynch
and Elson Ho, Deputy Bureau Chief and Senior Investigative Counsel, respectively, of the Major Economic
Crimes Bureau (MECB), under the supervision of Polly Greenberg, Chief of MECB, and David Szuchman,
Chief of the Investigation Division. Trial Preparation Assistants Lewis McCorkle, Nicholas Werle, and
Adam Wenick assisted in the investigation.
District Attorney Vance also thanked the following individuals for their assistance in the investigation:
Trial Attorneys Sarah Devlin and Dylan Fallik, and Kendall Day, and Craig Timm, Acting Chief, and
Deputy Chief, respectively, of the DOJ AFMLS; Assistant U.S. Attorneys Matthew Graves, Maia Miller,
Ann H. Petalas, George Varghese, and Gregg Maisel, Chief of the National Security Section of the United
States Attorneys Office for the District of Columbia; Katherine Landy, Yoon Hi Greene, and Sean OMalley
of the Federal Reserve Bank of New York; Michael Dondarski of OFAC; Special Agent Matthew Komar of
the FBI; and Special Agent John Matala of the IRS-CI.

http://manhattanda.org/press-release/da-vance-announces-342-million-settlement-commerzbank

Page 5 of 5