According to a filing on November 19 in criminal court in Manhattan, the French bank Societe Generale has been fined for violations of the 100-year-old Trading With the Enemy Act.
The crime involves what the government estimates as over $13 billion in Cuban money the French bank laundered. It did that via 21 of its credit facilities over a period running from 2004 through 2010.
The laundering covered multiple organizations, but most were between a Cuban state-run oil production and producing enterprise and a Dutch commodities trading firm. Those transactions stayed secret for so long through deliberately misleading and inaccurate record-keeping and re-routing through Spanish banks and other financial routes to make it harder to trace the money. Further subterfuge involved the processing of what are known as illegal “U-turn” transactions. In those cases the bank accelerated the process of filtering Iranian money through U.S. banks by manufacturing cover payments. Those cover payments helped divide transactions and make it harder for U.S. regulators to discover what had really happened.
U.S. Justice Department investigators uncovered the first of many such illegal transactions in March 2012. Then they were digging into money routed by Societe Generale for an already-sanctioned entity in Sudan. The bank hid those transactions too and only publicly disclosed them over a year after the fact.
The $1.3 billion fine levied against Societe Generale was for violations of the 1917 Trading With the Enemy Act. It became law during World War I as a means of keeping American businesses doing business with Germany. The countries the law applied to have changed over the years. North Korea was removed from that list in 2008. Cuba is now the sole remaining country covered by the Act.
Terms of the arrangement are not as bad as they could be for Societe Generale. The Justice Department has agreed to defer prosecution during a three-year probationary period. Only $712 million of the total fine is required to be paid immediately. The arrangement also has the Justice Department agreeing that Societe Generale will not be subject to prosecution for criminal tax violations too.
Society Generale’s CEO said in a statement about his bank’s crimes that, “We acknowledge and regret the shortcomings that were identified in these settlements and have cooperated with U.S. authorities to resolve these matters."
For Maria Vullo, New York State’s Department of Financial Services head, while this was a victory for the law and the fines were welcome, the system which allowed it to happen was clearly broken. In her own prepared statement, she said, “The absence of an effective, global sanctions-compliance infrastructure and lack of management oversight allowed Societe Generale employees to ignore the scope and applicability of laws governing economic sanctions, as well as New York anti-money laundering and record-keeping laws.”
This is, according to the Justice Department, the second largest fine to date for financial institution violating U.S. sanctions. The number one fine was against Frank bank PNP Paribas. It was discovered to have violated U.S. sanctions prohibiting transactions with Sudan.
With the U.S. increasing its use of sanctions in other regions now, such those which went into effect with Iran earlier this month, countries and companies should take note that the U.S. Justice Department will prosecute those it deems in violation to the fullest extent of the law.
The U.S. is able to impose its will on foreign banks because those banks have presence and do business in the U.S.
It should be noted that America's sanctions against Cuba are illegal under international law and are denounced by virtually every other country on an annual basis.
The U.S. continues to wage war on Cuba for several reasons, none of which have to do with Cuba's lack of democracy or violation of human rights. The primary reason that the U.S. imposes sanctions on Cuba is because it won't simply tolerate any country so close to its borders that it can't control and exploit. Cuba's independence and alliance with America's other enemies keeps it in the capitalist empire's cross-hairs and as long as the U.S. controls and corrupts other governments in the region Cuba has no choice but to continue down the same path. Most Cubans really don't want to end up like Honduras, Haiti and other deeply broken and hopeless states.