Clearstream

Jan 2018 - Deutsche Borse said Friday the CBI had filed a complaint against Clearstream at a court in Luxembourg where the post-trade services provider is based. Deutsche Borse said Iran’s central bank wants Clearstream and Italian bank Banca UBAE SpA to return its assets plus interest in addition to damages worth the same amount. The assets sought reportedly include about $1.9 billion which Clearstream has turned over to the US to “compensate” around 1,000 Americans claiming damage from Iran over a 1983 bombing in Beirut and another attack in 1996 in Saudi Arabia. The CBI further seeks around $2 billion in customer assets which are held at Clearstream and are subject to similar appropriation in the US and Luxembourg.

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“Deutsche Börse said on Wednesday that its Clearstream unit was the subject of a criminal investigation into potential violations of United States money laundering laws and sanctions against Iran. The German stock exchange said the unit was cooperating with an investigation by the office of Preet Bharara, the United States attorney for the Southern District of New York. ‘The investigation is in a very early stage and our U.S. counsels are currently analyzing the situation,’ Clearstream said in a statement on Wednesday. ‘Investigation is a search process in a criminal proceeding. It is not a prosecution. Clearstream is currently not subject to prosecution’…Clearstream, based in Luxembourg, provides post-trading and settlement services – namely delivering cash and securities between trading parties. It settles more than 250,000 transactions a day. On Wednesday, Clearstream said Mr. Bharara’s office had recently issued a grand jury subpoena seeking data on any property belonging to Iran or its central bank that was possibly being held by Clearstream, as well as services or acts undertaken by the unit for Iran’s benefit. Clearstream said it would comply with the laws of all relevant jurisdictions…In January, Clearstream agreed to pay $152 million to settle civil claims by the Treasury Department that its United States account was used as a conduit to hold about $2.8 billion in securities for Iran’s central bank between December 2007 and June 2008.” (New York Times, “Deutsche Börse Unit Is Subject of U.S. Criminal Investigation,” 4/2/14)

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“A U.S. grand jury is probing whether Deutsche Boerse AG's Clearstream Banking SA unit took any steps to benefit Iran and its central bank, according to a court filing in a case that stems from the 1983 bombing of the U.S. Marine barracks in Beirut. The grand jury subpoena issued in New York seeks documents related to any property held or any services rendered by Clearstream for the benefit of Iran or its central bank, Bank Markazi. The grand jury is looking at possible violations of money laundering and Iran sanctions laws, according to the subpoena. A spokesman for Luxembourg-based Clearstream said the bank was aware of the subpoena but had no further information on the investigation. The filing on Monday came as part of a lawsuit brought by family members of the victims of the Beirut bombing, who won a $2.7 billion judgment against Iran in 2007. The families have accused Iran of providing material support to Hezbollah, which carried out the attack, killing 241 U.S. servicemen. The lawsuit was filed in 2010 after the U.S. Treasury Department uncovered $1.8 billion in Iranian funds held at Citibank in New York, part of Citigroup Inc. The complaint named Iran and a number of banks, including Citi, Bank Markazi, Clearstream and Rome-based Banca UBAE, as defendants and sought to have the funds turned over to help satisfy the judgment. The other banks were alleged to have helped Iran hide its control of the accounts and transfer money out of the bank after it was ordered frozen…Citi did not oppose the plaintiffs' request to have the funds handed over, but Clearstream, Banca UBAE and Bank Markazi all moved to dismiss the lawsuit…In January, in a separate case, Clearstream agreed to pay $152 million to settle U.S. government claims that the banking unit held some $2.8 billion in securities in the United States for Bank Markazi. The bank said in January that the settlement ended the probe without a formal finding that Clearstream had violated U.S. sanctions laws prohibiting Iran's central bank from any financial dealings with the United States. The case is Peterson v Islamic Republic of Iran, U.S. District Court for the Southern District of New York, No. 10-4518.” (Reuters, “U.S. grand jury probing Deutsche Borse unit's ties to Iran bank,” 4/1/14)

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“A Deutsche Boerse unit agreed to pay $152 million to settle allegations that it held some $2.8 billion in securities in the United States for the central bank of Iran, the U.S. Treasury said on Thursday. The unit, Clearstream Banking of Luxembourg, had an account with a U.S. financial institution in New York from December 2007 to June 2008 through which Iran's central bank held interest in 26 corporate and sovereign bonds, the Treasury Department said. It did not name the U.S. financial institution involved. ‘Clearstream provided the government of Iran with substantial and unauthorized access to the U.S. financial system,’ Adam Szubin, who leads the Treasury office that enforces U.S. sanctions, the Office of Foreign Assets Control, said in a statement. Deutsche Boerse, which had already disclosed the settlement amount in November, said on Thursday the settlement closed the probe without a formal finding that Clearstream had violated U.S. sanctions laws…Clearstream met with U.S. officials about the account in 2007 and 2008, and decided to end its business with Iranian clients, Treasury said. According to the settlement, in February 2008 Clearstream transferred the rights to the Iranian central bank's securities to a custody account of a European commercial bank held by Clearstream. But Iran continued to own those securities, and the securities continued to sit in Clearstream's New York account, the Treasury Department said. Emails also showed that several Clearstream employees, including at least one supervisor and one senior executive, recognized that transferring the securities to a custody account still meant Iran's central bank owned them, according to the settlement. Clearstream neither admitted nor denied the Treasury Department's allegations. Clearstream eventually cooperated with OFAC and stopped dealing with Iran, according to the Treasury Department, which said it agreed to reduce the ultimate size of the fine. Under the settlement, Clearstream is required to maintain policies that ensure similar actions do not happen again.” (Reuters, “Deutsche Boerse to pay $152 million in U.S. sanctions probe,” 1/23/14)

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“The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a $152 million agreement with Clearstream Banking, S.A. (Clearstream), of Luxembourg, to settle its potential civil liability for apparent violations surrounding Clearstream’s use of its omnibus account with a U.S. financial institution as a conduit to hold securities on behalf of the Central Bank of Iran (CBI). ’Clearstream provided the Government of Iran with substantial and unauthorized access to the U.S. financial system,’ said OFAC Director Adam J. Szubin. ‘Today’s action should serve as a clear alert to firms operating in the securities industry that they need to be vigilant with respect to dealings with sanctioned parties, and that omnibus and custody accounts require scrutiny to ensure compliance with relevant sanctions laws.’ From at least December 2007 through June 2008, Clearstream held an account at a U.S. financial institution in New York through which the CBI maintained a beneficial ownership interest in 26 securities, with a nominal value of $2.813 billion, and exported certain associated securities-related services to the CBI.  Clearstream, as intermediary, served as the channel through which the CBI held interests in these securities and transferred those interests at a later date, thereby exporting custody and related services from the United States to the CBI in apparent violation of the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. part 560.  Following meetings with OFAC officials in late 2007 and early 2008, in which Clearstream conveyed its decision to terminate its business with Iranian clients, Clearstream transferred the above-mentioned 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 CBI to continue holding its interests in the securities through Clearstream’s omnibus account in the United States.  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…learstream’s strong remedial response to subsequently enhance its sanctions compliance policies and procedures was a major factor in OFAC’s mitigation of the size of the settlement amount.” (U.S. Department of Treasury, “Treasury Department Reaches Landmark $152 Million Settlement with Clearstream Banking, S.A.,” 1/23/14)  

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"Deutsche Boerse agreed on Thursday to pay $152 million to settle allegations by the U.S. Office of Foreign Assets Control (OFAC) that the company's Clearstream unit may have violated U.S. economic sanctions tied to Iran. The German exchange operator received an offer from the United States in October after OFAC closed the investigation." (Reuters, "Deutsche Boerse settles Iran suit with U.S.," 11/7/13)

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"Deutsche Boerse AG (DB1) said the fine its Clearstream unit faces from U.S. government allegations that it violated sanctions against Iran may be half the previously disclosed amount. The penalty totals $169 million, or only $152 million if the Frankfurt-based company settles with the U.S. Treasury Department’s Office of Foreign Assets Control, Deutsche Boerse said in a statement yesterday. In January, Deutsche Boerse said it might have to pay $340 million. The Treasury investigation, which Deutsche Boerse said has concluded, centered on securities transfers within the Clearstream system in 2008, following the company’s decision in 2007 to close Iranian customers’ accounts. The company started talks on a deal with the U.S. Treasury in 2008, the Frankfurt-based exchange said earlier this year…'A settlement with OFAC would not constitute a final determination that a violation has occurred,' Deutsche Boerse said in yesterday’s statement. The exchange operator will now decide whether to settle with U.S. regulators, it said. The fine will be included as a provision in the company’s third-quarter filing. Deutsche Boerse shares slid 1.83 euros, or 3.2 percent, to 55.57 euros at 9:22 a.m. in Frankfurt today, the biggest drop in 11 weeks." (Bloomberg, "Deutsche Boerse’s Iran Fine From U.S. Is Half Estimate," 10/29/13)

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"Deutsche Boerse on Thursday said it would ask a U.S. court to dismiss claims against its Clearstream unit from relatives of a 1983 bombing of the U.S. Marine Corps barracks in Beirut. For a settlement to go through, Deutsche Boerse needed the approval of a certain amount of plaintiffs. 'The requisite number of signatures has been obtained,' Boerse said in a regulatory statement. Through its Clearstream unit, Deutsche Boerse has been embroiled in a legal dispute with U.S. plaintiffs seeking damages from Iran for Clearstream's alleged role in helping Hezbollah carry out the barracks attack during the civil war in Lebanon. As part of this action, U.S. plaintiffs sought in 2008 to freeze Iranian funds held in Luxembourg-based Clearstream's securities account. The U.S. amended a sanctions bill against Iran in August 2012 which opened the door to further damages claims against foreign lenders including Clearstream." (Reuters, "Deutsche Boerse to seek dismissal of Clearstream case in U.S.," 10/24/13)

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"Deutsche Boerse AG said U.S. regulators may fine its Clearstream settlement unit as much as $340 million over possible violations of sanctions against Iran.  Clearstream has started talks on a deal with the U.S. Treasury Department's Office of Foreign Assets Control related to securities transfers within its settlement system in 2008, the Frankfurt-based exchange said in a statement today. Deutsche Boerse shares rose 0.2 percent to 47.03 euros at the close of trading in Frankfurt. Standard Chartered Plc agreed to pay $327 million in fines last month, including $132 million to OFAC, after regulators said it violated U.S. sanctions with Iran. Britain's second- largest bank by market value was accused of helping Iran launder about $250 billion in violation of federal laws, keeping false records and handling wire transfers for Iranian clients." (Bloomberg, "Deutsche Boerse Faces $340 Million Fine Over Iran," 01/09/13)

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"The Senate and the House of Representatives are drafting bills that would seek to blacklist essentially every Iranian bank. The U.S. Treasury has blacklisted 18 Iranian banks, but lawmakers say Tehran is using more than 20 other banks to finance its nuclear program and its support for militant groups, such as Hamas in the Palestinian territories and Hezbollah in Lebanon. Treasury Department officials said Wednesday that they have blacklisted 23 Iranian financial institutions in actions taken against banks and other firms. Congressional officials said the new legislation will also target communications, software and technology companies that continue to do business with Iranian banks. Possible targets include Deutsche Börse AG's Clearstream unit and Belgium-based Euroclear Group, which are believed to facilitate financial transactions for Iran's central bank. Clearstream didn't respond to requests to comment." (The Wall Street Journal, "U.S. to Probe Iran's Commitment to Talk," 3/7/2012)