A federal court ruling dismissing a $300 million U.S. lawsuit against two European banks may limit how the United States enforces its anti-money laundering laws abroad, say former investigators.
Lloyds TSB Bank Plc. has agreed to pay the United States $350 million to settle charges that it hid wire transfers with blacklisted companies, the largest sanctions-related penalty to date.
A London-based bank has forced the closure of accounts for an Islamic charity it believes has ties to Hamas, a Palestinian organization sanctioned internationally for terrorism, the charity disclosed this week.
The bank, which is based in London, expects to reach a "resolution" with the U.S. Justice Department, U.S. Treasury Department's Office of Foreign Assets Control and New York District Attorneys office, Lloyd's said in a statement Friday.
Lloyds and the Bank of Cyprus are subject to U.S. jurisdiction because Title 18 USC 1956 (b) grants such extraterritorial reach to U.S. courts and because both signed "Consent of Jurisdiction" letters in order to do business in the U.S., according to the Justice Department.
The cases, seeking nearly $300 million in fines, should be dismissed because they constitute an "unprecedented attempt to apply the U.S. money laundering statute beyond its explicit, but limited" extraterritorial reach, Bank of Cyprus and Lloyds TSB Bank argued in court documents released today.
The fallout from the securities fraud and anti-money laundering case involving the two institutions may continue, suggest compliance consultants, who say financial institutions involved in correspondent transactions with the defendants may face pressure from regulators and law enforcement.
Prosecutors are seeking nearly $300 million in penalties, charging that the two foreign-based banks helped to launder the proceeds of a massive securities fraud involving shares of software maker AremisSoft.