Royal Bank of Scotland (RBS)
In 2019, CalSTRS identified Royal Bank of Scotland as potentially having ties to Iran. CalSTRS subsequently removed Royal Bank of Scotland after reviewing the company’s internal controls to prevent sanction violations.
According to its Annual Report filed with the SEC for fiscal year 2019: "During 2019 affiliates of RBS Group (RBSG) facilitated 14 payments which were remitted by, or on behalf of, Iranian Government owned entities and/or entities designated under Executive Order 13382 or 13224, and received by RBSG customers (non-designated and located in the United Kingdom) in relation to legal fees.
All the payments described above were processed in full compliance with applicable sanctions and where relevant authorised under applicable licence.
The transactions described above resulted in £165,000 gross revenue to RBSG. Considering the processes in place to undertake such transactions, including enhanced due diligence processes, the profit from these transactions was negligible. RBSG has a restrictive risk appetite in relation to transactions involving Iran and will only continue to engage in transactions similar to those described above as long as such transactions are in compliance with applicable sanctions laws and within RBSG’s risk appetite.
RBS maintain one account for an Iranian Government entity located in the United Kingdom. The purpose of the account is to facilitate UK domestic transactions only for employees’ salaries and operating costs such as UK taxes and utilities. No commercial activity is processed through the account.
Under applicable licenses granted by appropriate authorities, affiliates of RBSG hold four legacy guarantees entered into between 1984 and 2005, which support arrangements lawfully entered into by affiliates of RBSG customers with Iranian counterparties. During 2019 a guarantee previously understood to have expired was identified as still active and is an addition to the three guarantees reported in 2018. These legacy guarantees are in favour of Iranian Government owned financial institutions. The affiliates of RBSG have made considerable efforts to exit and formally cancel the guarantees.
In 2019, one guarantee earned commission of EUR 24.00, and the other three guarantees received no revenue.
Iranian Petroleum Industry
Section 13(r) of the Securities Exchange Act (as amended) requires disclosure of any knowing engagement in activity described in section 5 (a) or (b) of the Iran Sanctions Act, including significant investments in or transactions that could develop the Iranian petroleum or petrochemical sectors.
During 2019, affiliates of RBSG received a number of payments on behalf of their clients in relation to services provided in connection to an oil and gas field located in the North Sea from a UK Company (non-Iranian party). The UK Company manages the operation of the oil and gas field which they jointly own with a company owned and controlled by the Government of Iran. None of these transactions directly involved Iranian Government owned entities or Iranian Government owned financial institutions. All such payments were made in compliance with applicable sanctions and only attract a standard processing fee which generates negligible profit for RBSG."
"During 2017, affiliates of RBS facilitated 10 payments which were remitted by Iranian government-owned entities. These payments were received by RBS customers (non-designated parties located in the United Kingdom) in relation to various matters, including legal fees and personal remittance. Five of these payments involved Iranian Government owned financial institutions. In addition, there were a total of two outward payments during 2017 where the beneficiaries were Iranian government owned entities. These two transactions were in relation to cancellation of outstanding guarantees and legal fees and involved Iranian Government owned financial institutions. During 2017, affiliates of RBS also received 39 payments from and to accounts of non-designated parties where financial institutions identified under Executive Order 13599 were involved in the transaction. These transactions related to various matters, including legal fees and personal remittance. All the payments described above were processed in full compliance with applicable sanctions and, where required, authorised under applicable licence. Transactions involving Iranian government owned entities totalled 51 and resulted in less than the equivalent of £16,500 in gross revenue to RBS. Considering the processes in place to undertake such transactions, including enhanced due diligence processes, RBS has not made any profit from these transactions. RBS intends to continue to engage in transactions similar to those described in this paragraph as long as such transactions are in compliance with applicable sanctions laws and within RBS’s risk appetite which became more restrictive during the course of 2017."
"The Royal Bank of Scotland has rebuffed efforts by the British government, a major shareholder, to coax the lender into facilitating trade with Iran as it seeks to avoid risky business, sources with knowledge of the discussions say. In recent months British officials have sought to boost business ties with Iran - a year on from the lifting of international sanctions - as Britain tries to forge new trade ties following June's vote to leave the European Union. The sources said Britain's finance ministry had tried to use the government's influence with RBS and to a lesser extent Lloyds, in which it holds a minority stake, to help speed up trade finance with Iran, including clearing services for Iranian banks in pounds... A Lloyds spokesman said it was a UK-focused retail and commercial bank, adding that it was "mindful that Iran remains a higher risk country with which to do business". "We therefore consider all requests on a case-by-case basis in order to protect the bank and our customers," the spokesman said... Major global lenders like HSBC which have large operations in Britain have reiterated they have no intention of doing any new business involving Iran, questioning why the United States has encouraged them to do so when U.S. financial firms are restricted." (Reuters, "State-Backed British Bank Rebuffs Government Push to Boost Iran Trade: Sources," 1/19/2017).
"Royal Bank of Scotland Group PLC agreed to pay $100 million in penalties over allegations that it violated U.S. sanctions against Iran, Sudan and other nations, in the latest move by regulators to crack down on money laundering. Federal and state agencies said Wednesday that RBS took steps to prevent payments it processed from being flagged as subject to sanctions. In many cases, RBS removed 'material references' to U.S.-sanctioned locations or individuals from payment messages, according to the U.S. Treasury Department. 'This action demonstrates our continuing efforts to aggressively enforce U.S. sanctions laws against Iran and other sanctioned parties,' Adam Szubin, director of the Treasury's Office of Foreign Assets Control, said in a statement. In addition to the Treasury, RBS also settled with the Federal Reserve and the New York Department of Financial Services. The Financial Conduct Authority, RBS's U.K. regulator, assisted in the agencies' investigation of the bank. RBS said Wednesday that the fines stemmed from an investigation it initiated in 2010. The bank said it 'deeply regrets these failings' and has taken several steps to "address the shortcomings" in its controls, including reviewing all customer relationships in relevant countries, terminating certain client relationships, beefing up its anti-money-laundering compliance teams and other steps. RBS will pay $50 million to the federal agencies and $50 million to the New York agency, which agreed to not take further action against the bank over the alleged violations covered by the agreement. The agreement also calls for RBS to beef up its policies to prevent such activity from occurring. RBS has terminated several employees who allegedly engaged in the misconduct, including its former head of Asia, Middle East & Africa global banking services and the former head of its money-laundering prevention unit for corporate markets, according to New York officials. The bank declined to comment or assist a reporter in contacting those people. In addition, eight employees had bonuses taken back…The Treasury Department said RBS interfered with U.S. sanctions from at least 2005 to 2009. Separately, the New York Department of Financial Services said in a consent order that, from at least 2002 to 2011, RBS conducted more than 3,500 transactions through New York banks involving Sudanese and Iranian customers and beneficiaries. The U.S. Justice Department and U.S. District Attorney's Office in New York have completed criminal investigations of RBS and aren't taking action against the company, RBS said." (Wall Street Jounral, "RBS to Pay $100 Million Over Alleged Violations of U.S. Sanctions," 12/11/13)
The Royal Bank of Scotland Group owns ABN AMRO, which also does business with Iran. U.S.-based Citizens Financial Group also is owned by The Royal Bank of Scotland Group.
"ABN AMRO Bank, now owned by Royal Bank of Scotland Group, agreed in 2006 pay $70 million in penalties assessed by U.S. regulators related to alleged dealings with entities from Iran and Libya." (Daily Mail, "Obama to target Lloyd's of London in plan for tougher sanctions on Iran," 10/2/09)
"A new line of investigation has focused on banking relationships. In December, ABN Amro paid $80m in penalties after it was found to have violated rules on dealing with Iran and Libya, while UBS paid $100m in 2004 after admitting breaches of rules on transactions with Iran, Libya, Cuba and Serbia. Both ABN Amro and UBS have reduced their Iran operations, as has Credit Suisse. But it has emerged that the Justice Department is probing three more banks - HSBC, Standard Chartered and France's BNP Paribas... The Royal Bank of Scotland also operates in Iran, but it is not believed to be the subject of any US regulatory interest." (The Independent, “UK banks caught in Iran sanctions probe,” 2/5/06)
Iran’s carmaking and shipbuilding sectors are growing quicker than domestic banks can keep up with. In order to function, these industries rely on European loans. Banks providing them include HSBC, BNP Paribas, Deutsche Bank, Commerzbank, Standard Chartered and Royal Bank of Scotland. Some, however, have begun to show caution. Swiss bank UBS has said it was stopping business in Iran because the commercial climate looked unattractive. Credit Suisse has said it will not offer loans to new Iranian clients. (Daily Times, “Iran’s bravado on UN sanctions may ring hollow,” 2/2/06)
" Response: "I found your letter most informative...assure you that RBS has a robust Sanctions Policy in place." (June 22, 2016)