Watching TV news early this morning, I was taken aback seeing the news that Lloyds TSB, one of the UK’s leading banks (and one I’ve had accounts with for 30 years), has agreed to pay a penalty of $350 million to US authorities regarding the bank’s activities that helped certain customers get around US sanctions against Iran, Libya and Sudan.
[…] The US Justice Department said Lloyds TSB had acknowledged “criminal conduct” and agreed to forfeit the funds in return for an end to its investigation. Prosecutors said the bank faked records so clients in Iran, Libya and Sudan could do business with US institutions. Lloyds TSB said that it had cooperated fully with the probe.
The press release issued by the US Justice Department late yesterday following a press briefing contains some astonishing detail about exactly what went on at Lloyds TSB during a 12-year period:
[…] According to court documents, beginning as early as 1995 and continuing until January 2007, Lloyds, in both the United Kingdom and Dubai, falsified outgoing U.S. wire transfers that involved countries or persons on U.S. sanctions lists. Specifically, according to court documents, Lloyds deliberately removed material information – such as customer names, bank names and addresses – from payment messages so that the wire transfers would pass undetected through filters at U.S. financial institutions. This process of “repairing” or “stripping,” as Lloyds commonly referred to it, allowed more than $350 million in transactions to be processed by U.S. correspondent banks used by Lloyds that might have otherwise been blocked or rejected due to sanctions regulations or for internal bank policy reasons. According to court documents, the criminal conduct by Lloyds was designed to evade, and to assist its customers in evading, U.S. economic sanctions imposed against Iran, Sudan and other countries.
I really don’t like seeing words like “falsified,” “deliberately removed material information” and “criminal conduct” when those words describe activities carried out by an organization I’ve trusted implicitly during my entire adult life.
So what does Lloyds TSB have to say on the matter?
I checked the bank’s investor relations website and its online media centre for the bank’s press release or some kind of statement.
Not a word. No press release, no statement that I could find. Even though some media reports speak of a statement by the bank, I could find no reference to this matter anywhere on the bank’s websites.
Maybe they’re preparing something, a statement or press release, that they’ll get out on Monday morning. That’s not good enough and I’m speaking primarily as a customer. I want to know what my bank has to say about this. I don’t want to be reading about this in every newspaper when my bank is completely silent.
And what about Lloyds TSB’s Group Code of Business Conduct (PDF) whose very first two paragraphs say this:
We aim to set an example in the conduct of our business. We demand honesty and integrity in everything we do, and will not do business if our standards are endangered. We greatly value our good reputation.
High ethical standards are of crucial importance to us, and in the following statements we set out our core values which apply equally to all members of the Group.
Good reputation and high ethical standards seem to have fallen by the wayside during a 12-year period.
I was just reading a post this morning by John Redwood, my MP, who has an interesting perspective in light of the government’s bail-out of the UK financial sector:
[…] If this were private shareholder money it would be a matter for them to hammer out with their Directors. Now this bank has taken substantial sums from taxpayers who are co-owners, it becomes a matter for all of us.
I am not sure this was the kind of use for the cash the government had in mind when it put up new share capital. Did the government know this action was pending? Did they discover anything before they bought in, or did they studiously refuse to do any due diligence as they implied at the time?
It’s not often I agree with John Redwood’s views, but I certainly do in this case.
This is all hugely disappointing. So, someone authoritative at Lloyds TSB, what have you got to say?
[Update Sunday Jan 11:] Lloyds TSB now has a statement published in the media centre of the Lloyds TSB Dubai website.
It’s a Microsoft Word document – hardly the format that would be easily accessible by almost anyone with an internet connection: how about a simple HTML web page? – dated January 9 but posted today, January 11.
The statement reflects much of what the US Department of Justice had to say in their press release on Friday.
No doubt the statement is the end result of careful drafting, tweaking and sign-offs by senior executives not to mention teams of lawyers, so it’s as dry and impersonal as you might imagine.
It’s also, to my eye (viewing it as a communicator now, as much as a customer), one of the most arrogant corporate statements of its type I’ve ever seen.
“We are committed to running our business with the highest levels of integrity” is the most laughable and unbelievable phrase to include in this document when there is no apology to accompany it.
And where’s the humility?
Not impressed, Lloyds TSB.
I'm actually surprized that no one is going to jail over what they've done. You can bet if it were an individual rather than a major bank, they'd already be in Guatanamo.
The whole thing stinks, imo. It amazes me, too, although that's the deal – pay $350 million and everyone quietly moves on. Makes a mockery of the bank's code of business conduct.
[…] Neville Hobson has written a fantastic blog post which I urge you to read. […]
Agreeing w/ @jangles about Lloyds TSB: Helping Iran &c. evade sanctions is despicable. And Lloyds predictably clams up. http://is.gd/f9C0
Right on, Neville. I saw this too and as a Lloyds customer I'm very disappointed. For all we know the Sundanese cash was used to buy genocide enhancing weapons etc. All ethics aside, on a business level it is stupid as well. The Justice Dept. is very, very good at ferreting out sanctions busting and keeping the US GVT happy is a rather more important objective than helping a few shady characters. Just shows that money talks louder than sense, as well as basic morality.
[…] Huge disappointment with Lloyds TSB […]