Italian bank UniCredit Group SpA agreed to pay a total of $1.3 billion to resolve U.S. federal and state investigations into allegations the bank and two of its subsidiaries violated several U.S. sanctions programs.
UniCredit’s German subsidiary, called UniCredit Bank AG, agreed to plead guilty to a criminal charge in federal and state court as part of the settlements announced Monday. Its Austrian unit, called UniCredit Bank Austria, entered into non-prosecution agreements with federal and state authorities. Prosecutors declined to charge the Italian parent, the bank said, though it agreed to ensure both subsidiaries’ obligations are fulfilled. All three committed to improve their compliance programs to minimize the risk of recurring conduct.
UniCredit reached settlements with the U.S. Treasury Department, the U.S. Justice Department, the Federal Reserve, the New York Department of Financial Services and the Manhattan District Attorney’s Office. The settlements “are the result of a years-long interagency effort” and reinforce the Treasury’s commitment to working with its government partners, said Andrea Gacki, director of the Treasury’s Office of Foreign Assets Control.
This action comes on the heels of a series of sanctions settlements that included language directing the companies to implement and maintain compliance programs that minimize the risk of recurring conduct.
UniCredit confirmed the settlements in a statement that highlighted its cooperation, including sharing the results of internal investigations. The respective amounts owed by the parent and the two subsidiaries are entirely covered by provisions already set aside, the statement said. The settlement “clears up a legal hangover” for the bank, according to a Bloomberg report.
Each agency cited a different number and amount of transactions as part of its respective settlement.
UniCredit’s German subsidiary processed more than 2,000 payments worth more than $500 million through U.S. financial institutions in violation of multiple U.S. sanctions programs, the Treasury said.
UniCredit Bank AG operated U.S.-dollar accounts on behalf of the Islamic Republic of Iran Shipping Lines (IRISL) and several companies owned or affiliated with the shipping line, the Treasury said. The bank “selectively applied controls” on the companies’ accounts and processed transactions in which IRISL had an interest for almost two years after the shipper was sanctioned, according to a settlement agreement document signed by Treasury and the bank’s general counsel.
It managed the accounts of the companies in a way that obscured the involvement of IRISL in transactions sent to or through U.S. intermediaries, the Treasury said.
Meanwhile, federal prosecutors cited at least $393 million moved by the German unit over a 10-year period on behalf of sanctioned entities, most of which concerned IRISL. UniCredit Bank AG “went to great lengths” to help IRISL gain access to the U.S. financial system, said Brian A. Benczkowski, an assistant attorney general of the Justice Department’s Criminal Division.
UniCredit Bank AG processed nearly $5.4 billion in “non-transparent U.S. dollar payment transactions” between 2002 and 2011, according to New York’s Department of Financial Services. Among the bank’s methods, the regulator said, were so-called “cover payments” and “wire stripping,” which involve disguising or omitting parts of payment messages carried by SWIFT, a Belgian-based communication network that enables banks to correspond concerning financial transactions.
The German subsidiary in 2004 implemented an automatic transaction-filtering tool to identify transactions relevant to OFAC, but the bank’s compliance team established detailed instructions for intentionally circumventing the tool in part to avoid inconveniencing customers, the state regulator found. The guide told employees to submit payment orders in what was euphemistically known as an “OFAC-neutral manner,” the New York regulator said.
The Austrian unit carried out about 330 impermissible U.S.-dollar transactions between 2004 and 2012 worth $118 million and conducted nearly 2,500 non-transparent U.S.-dollar payments worth $3.9 billion, New York regulators said.
UniCredit SpA, the Italian parent, conducted 957 U.S.-dollar transactions worth $79.5 million in violation of U.S. sanctions laws and regulations, the state regulator said. Several months after Bank Sepah was sanctioned by the U.S., United Nations and the European Union, UniCredit opened an account “at the request of, and under the control of, the Italian government,” the regulator said. The account’s purpose: holding and disbursing Bank Sepah’s frozen funds, according to the state regulator.