Last month, two European banks filed record settlements witch regulators, replete with embarrassing e-mails, and prayed that the story would quickly go away. The Barclays rate-manipulation scandal is still raging, while the murmur over ING Bank’s $619 million settlement for evading U.S. sanctions on Cuba and Iran lasted only a day. But ING is only the latest in a wave of sanction-busting deals that have cost European banks $2.5 billion since 2009. It punctuates a dramatic shift in the power of the Treasury Department’s Office of Foreign Assets Control, which in 2008 levied $3.5 million in penalties. Until now, OFAC’s rise has been as unremarked in the press as unexamined in court.
OFAC director Adam Szubin told Congress in 2007 that his agency’s fines needed to rise lest they be ignored as a cost of doing business. Congress promptly goosed the penalties under the International Emergency Economic Powers Act (IEEPA). But equally important, OFAC resolved to deter cheating on sanctions by making the most of its pre-existing authority. In a series of collaborations with the Justice Department and the Manhattan district attorney’s office, OFAC has cracked down on evasive practices by European banks that routinely undermined U.S. foreign policy, especially with Iran. At the heart of most of the deferred prosecutions were claims that the banks engaged in a nervy practice known as “stripping” routing funds from blacklisted nations through U.S. accounts while stripping them of identifying data.
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