Clearstream Settles With U.S. Treasury in Relation to Iran Sanctions Violations

Clearstream has entered into a settlement with the U.S. Treasury’s Department's Office of Foreign Assets Control (OFAC) based on a payment of $152 million in relation to suspected violations of U.S. sanctions on Iran.
By Janet Du Chenne(59204)
Clearstream has entered into a settlement with the U.S. Treasury’s Department’s Office of Foreign Assets Control (OFAC) based on a payment of $152 million in relation to suspected violations of U.S. sanctions on Iran.

OFAC had investigated Clearstream’s maintenance of an omnibus account in the United States and certain securities transfers within the Clearstream settlement system in 2008. These transfers had related to the decision taken by Clearstream in 2007 to close its Iranian customers’ accounts.

The OFAC had looked into certain securities transfers within the Clearstream settlement system in 2008 undertaken to close Iranian customers’ accounts and the maintenance of an omnibus account in the U.S. during the same period. In 2007, Clearstream decided to terminate its relations with Iranian entities. This led customers to initiate certain transactions in February 2008. OFAC ultimately commenced an investigation regarding whether these transactions violated the U.S. Iranian Transactions Regulations.

In a statement on its website, the U.S. Treasury said that on terminating that business, Clearstream transferred the related securities entitlements free-of-payment (FOP) from the CBI’s account at Clearstream to a European bank’s newly-opened custody account at Clearstream. “This new custody account allowed the Central Bank of Iran to continue holding its interests in the securities through Clearstream’s omnibus account in the United States,” says the statement. “Given the totality of facts and circumstances surrounding the transfers, Clearstream had reason to know that the CBI was retaining beneficial ownership of the securities following the FOP transfers. As a result of the FOP transfers, the record ownership of the securities entitlements on Clearstream’s books changed, but the beneficial ownership did not, resulting in the CBI’s interest being buried one layer deeper in the custodial chain. Clearstream’s exportation of services from the United States to the CBI then continued after the securities entitlements were moved to the European bank’s custody account.”

As Clearstream disclosed in January 2013, OFAC’s preliminary view was that Clearstream had violated US sanctions on Iran in connection with certain securities transfers and included an indicative penalty of approximately $340 million.

In October, Clearstream was given the option to settle the matter with OFAC before the issuance of a pre-penalty notice of $168.8 million, in which case a 10% discount would apply, for a total settlement payment of $151.9 million. Clearstream subsequently decided to settle the matter with the Treasury.

The settlement will close the matter without a final agency finding that a violation by Clearstream of U.S. sanctions regulations has occurred, said a statement on Deutsche Börse’s website.

“OFAC has notified Clearstream that it has signed the settlement,” added the statement. “Therefore the settlement has become effective.”

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