On Wednesday, the US Attorney General Eric Holder announced the outcome of an extensive investigation into misconduct at one of the world's largest banks, Credit Suisse. In a settlement the bank is expected to pay a fine of $536 million. In a press briefing Mr Holder said: "For more than a decade, Credit Suisse did business with and for countries that the United States had specifically banned from our financial systems. The rules that prohibited financial transactions with these sanctioned nations were in place for many years. Credit Suisse, like all other major global banks, knew well that the United States would not process financial transactions from individuals or companies in places like Iran, Libya, Sudan, Burma, and Cuba. "But rather than adhere to the law and decline to serve these customers, Credit Suisse established a business model to allow these rogue players access to US dollars. At one point, the company even developed a pamphlet for its Iranian clients, explaining how to fill out payment messages so as not to trigger US filters. They created a 'how-to' book on committing a crime - and it worked well for years." The New York Times said: "In October, Robert M Morgenthau, the district attorney for Manhattan, announced that his office, the Justice Department and the Federal Reserve were investigating a large international 'mainstream bank' for allowing illicit financial transactions with Iran, which has long been subject to sanctions by Washington. At the time, Mr Morgenthau did not identify the institution. "For weeks since then, Credit Suisse executives have been negotiating the amount of the fine with federal and state authorities, according to information obtained by the Italian business newspaper Il Sole 24 Ore, the International Herald Tribune and The New York Times. "In its 2008 annual report, published this year, Credit Suisse, without disclosing that it was a target, said that American 'governmental authorities are reported to be conducting a broader review of how certain financial institutions have processed US dollar payments involving US sanctioned countries, persons and entities.'" The London Evening Standard said there are concerns at several other major banks. "Barclays, which has admitted it is also under investigation, declined to comment, but has previously said claims could be 'substantial'. "In a bid to calm nerves about further potential fines, Lloyds today issued a statement saying it did not expect to make any more payments, although it is still in talks with the US Office of Foreign Assets Control over the issue. "The vast scale of the CS fine left investors concerned about future actions by the US authorities into other European banks. "There are believed to be about nine major European banks under investigation over the issue." Mr Morgenthau, the ninety-year old DA for the New York City borough of Manhattan whose office was part of the investigation of Credit Suisse, places Iran high on his agenda. "People think that Iran is only a Middle East problem, but it's also a Central American problem and it's going to be a major economic problem ... If you talk to any of the major Jewish organisations, what we're doing on Iran is extremely important," Mr Morgenthau recently told The Jewish Week in New York in November. In a commentary published in The Wall Street Journal in September, Mr Morgenthau wrote: "My office has been told that that over the past three years a number of Iranian-owned and controlled factories have sprung up in remote and undeveloped parts of Venezuela - ideal locations for the illicit production of weapons. Evidence of the type of activity conducted inside the factories is limited. But we should be concerned, especially in light of an incident in December 2008. Turkish authorities detained an Iranian vessel bound for Venezuela after discovering lab equipment capable of producing explosives packed inside 22 containers marked 'tractor parts'. The containers also allegedly contained barrels labeled with 'danger' signs. I think it is safe to assume that this was a lucky catch - and that most often shipments of this kind reach their destination in Venezuela. "A recent US Government Accountability Office (GAO) study reported a high level of corruption within the Venezuelan government, military and law enforcement that has allowed that country to become a major transshipment route for trafficking cocaine out of Colombia. Intelligence gathered by my office strongly supports the conclusion that Hizbollah supporters in South America are engaged in the trafficking of narcotics. The GAO study also confirms allegations of Venezuelan support for Farc, the Colombian terrorist insurgency group that finances its operations through narcotics trafficking, extortion and kidnapping. "In a raid on a Farc training camp this July, Colombian military operatives recovered Swedish-made anti-tank rocket launchers sold to Venezuela in the 1980s. Sweden believes this demonstrates a violation of the end-user agreement by Venezuela, as the Swedish manufacturer was never authorized to sell arms to Colombia. Venezuelan Interior Minister Tareck El Aissami, a Venezuelan of Syrian origin, lamely called the allegations a 'media show,' and 'part of a campaign against our people, our government and our institutions.' "In the past several years Iranian entities have employed a pervasive system of deceitful and fraudulent practices to move money all over the world without detection. The regime has done this, I believe, to pay for materials necessary to develop nuclear weapons, long-range missiles, and road-side bombs. Venezuela has an established financial system that Iran, with the help of Mr Chávez's government, can exploit to avoid economic sanctions." The latest charges of misconduct by major banks come at the same time that Antonio Maria Costa, head of the UN Office on Drugs and Crime, said that at the height of the global financial crisis, the financial system was kept afloat by billions of dollars of drug money. The Observer reported: "Speaking from his office in Vienna, Costa said evidence that illegal money was being absorbed into the financial system was first drawn to his attention by intelligence agencies and prosecutors around 18 months ago. 'In many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor,' he said. "Some of the evidence put before his office indicated that gang money was used to save some banks from collapse when lending seized up, he said. " 'Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities... There were signs that some banks were rescued that way.' Costa declined to identify countries or banks that may have received any drugs money, saying that would be inappropriate because his office is supposed to address the problem, not apportion blame. But he said the money is now a part of the official system and had been effectively laundered."
pwoodward@thenational.ae