Banks Oppose Trade Violation Disclosure
August 23, 2002 12:09:00 PM ET
By Jonathan Nicholson
WASHINGTON (Reuters) - American bankers are opposing a U.S. Treasury Department plan to publish the names of firms who settle with the government for violating international trade bans, saying it could expose the industry to unmerited criticism for allegedly ``dealing with the enemy.''
The proposal is the brainchild of the Treasury Department's shadowy Office of Foreign Assets Control. The agency enforces trade sanction programs against anti-U.S. regimes in such countries as Cuba and Iraq and maintains a list of alleged terror financiers whose U.S. assets are to be blocked.
OFAC released 31 letters of comment on the plan this week, with most from the financial services industry, which sharply opposes the plan.
In early July, Treasury released settlements reached with more than 100 companies for alleged violations of the agency's regulations. The settlements were disclosed in response to a Freedom of Information Act request by the newsletter Corporate Crime Reporter.
The list included a wide variety of firms, ranging from Swedish-based furniture retailer IKEA to plane maker Boeing Co., with amounts from a few hundred dollars up to $2.4 million. The settlements dated back as far as 1998.
Several financial services companies were among those that had reached deals, including CNA Insurance Co. and Merrill Lynch & Co. Inc. CNA's settlement was related to sanctions against Cuba while Merrill Lynch's was in connection with OFAC's sanctions against Yugoslavia.
A Treasury Department spokeswoman said the comment letters were still under review and no decision would be made until the review was complete.
PROMOTING AWARENESS
In June, OFAC proposed publishing at least on a quarterly basis the names of companies and the dollar amounts involved in cases where a firm had been fined or a settlement deal reached. It also would list which sanction program was involved and give a brief description of the alleged violation.
However, the agency proposed keeping the name of individuals involved in settlements confidential.
OFAC said at the time that making the disclosures would ``promote greater awareness of its enforcement activities and encourage compliance.''
But the plan raised the hackles of banking groups.
John Byrne, senior counsel for the American Bankers Association, said banks already work at complying with OFAC's rules. Publishing the names of alleged violators would be ``misleading'' and could make consumers think a specific bank had lax controls. He contended that most violations are technical rather than intentional and are voluntarily reported.
In its comment letter on the proposal in July, which was released by OFAC this week to the public, the ABA said the move should be reconsidered and urged that any data released should simply have the type of company involved but not its name.
Byrne said banks take seriously their obligation to follow OFAC rules. A phone seminar on OFAC compliance in late July drew more than 2,000 participants, Byrne said, more than even Year 2000 problem seminars.
Similar concerns were voiced in letters from the Institute of International Bankers and the New York Clearing House, representing several large banks.
The Clearing House agreed that banks voluntarily report their own violations ``to be good corporate citizens and to establish a record of cooperation with OFAC.''
``Public release of information changes this equation by subjecting banks to unnecessary adverse publicity that is likely to be ill-informed and focused on sensational charges of 'dealing with the enemy,''' it added.
Consumers would not be told whether the violation was inadvertent or technical, whether the bank cooperated with OFAC or whether or not the bank admitted guilt when it settled, the group said.
Pittsburgh-based Mellon Financial Corp. was one of several big U.S. banks that also lashed out against the proposal.
``Mellon does not support, and argues strongly against, the disclosure of the identity of the institution or individual penalized or with which a settlement is negotiated,'' the company's associate counsel, James Painter, wrote.
``Disclosure to the general public will serve no good purpose,'' Painter said in the letter.
SOME SUPPORT PROPOSAL
But consumer advocates backed Treasury's proposal, saying it would aid OFAC's efforts and give consumers worthwhile information.
``The consumers who patronize these companies and the investors who evaluate the companies' management are entitled to full disclosure of civil penalties imposed upon, and settlements accepted by, businesses because of OFAC's enforcement efforts,'' said advocacy group Public Citizen.
There were even some in the banking industry in favor of the change.
An individual named Carol D'Angio, who described herself as a compliance officer with a large national bank, said she ``absolutely agreed'' with the idea.
``It is the role of every American to join in the battle that the U.S. Government battles every day -- whether it be terrorists or money launderers. By approving the proposed rule, financial institutions will be forced to learn the requirements set forth by OFAC and abide by them,'' she wrote.
© 2002 Reuters
August 23, 2002 12:09:00 PM ET
By Jonathan Nicholson
WASHINGTON (Reuters) - American bankers are opposing a U.S. Treasury Department plan to publish the names of firms who settle with the government for violating international trade bans, saying it could expose the industry to unmerited criticism for allegedly ``dealing with the enemy.''
The proposal is the brainchild of the Treasury Department's shadowy Office of Foreign Assets Control. The agency enforces trade sanction programs against anti-U.S. regimes in such countries as Cuba and Iraq and maintains a list of alleged terror financiers whose U.S. assets are to be blocked.
OFAC released 31 letters of comment on the plan this week, with most from the financial services industry, which sharply opposes the plan.
In early July, Treasury released settlements reached with more than 100 companies for alleged violations of the agency's regulations. The settlements were disclosed in response to a Freedom of Information Act request by the newsletter Corporate Crime Reporter.
The list included a wide variety of firms, ranging from Swedish-based furniture retailer IKEA to plane maker Boeing Co., with amounts from a few hundred dollars up to $2.4 million. The settlements dated back as far as 1998.
Several financial services companies were among those that had reached deals, including CNA Insurance Co. and Merrill Lynch & Co. Inc. CNA's settlement was related to sanctions against Cuba while Merrill Lynch's was in connection with OFAC's sanctions against Yugoslavia.
A Treasury Department spokeswoman said the comment letters were still under review and no decision would be made until the review was complete.
PROMOTING AWARENESS
In June, OFAC proposed publishing at least on a quarterly basis the names of companies and the dollar amounts involved in cases where a firm had been fined or a settlement deal reached. It also would list which sanction program was involved and give a brief description of the alleged violation.
However, the agency proposed keeping the name of individuals involved in settlements confidential.
OFAC said at the time that making the disclosures would ``promote greater awareness of its enforcement activities and encourage compliance.''
But the plan raised the hackles of banking groups.
John Byrne, senior counsel for the American Bankers Association, said banks already work at complying with OFAC's rules. Publishing the names of alleged violators would be ``misleading'' and could make consumers think a specific bank had lax controls. He contended that most violations are technical rather than intentional and are voluntarily reported.
In its comment letter on the proposal in July, which was released by OFAC this week to the public, the ABA said the move should be reconsidered and urged that any data released should simply have the type of company involved but not its name.
Byrne said banks take seriously their obligation to follow OFAC rules. A phone seminar on OFAC compliance in late July drew more than 2,000 participants, Byrne said, more than even Year 2000 problem seminars.
Similar concerns were voiced in letters from the Institute of International Bankers and the New York Clearing House, representing several large banks.
The Clearing House agreed that banks voluntarily report their own violations ``to be good corporate citizens and to establish a record of cooperation with OFAC.''
``Public release of information changes this equation by subjecting banks to unnecessary adverse publicity that is likely to be ill-informed and focused on sensational charges of 'dealing with the enemy,''' it added.
Consumers would not be told whether the violation was inadvertent or technical, whether the bank cooperated with OFAC or whether or not the bank admitted guilt when it settled, the group said.
Pittsburgh-based Mellon Financial Corp. was one of several big U.S. banks that also lashed out against the proposal.
``Mellon does not support, and argues strongly against, the disclosure of the identity of the institution or individual penalized or with which a settlement is negotiated,'' the company's associate counsel, James Painter, wrote.
``Disclosure to the general public will serve no good purpose,'' Painter said in the letter.
SOME SUPPORT PROPOSAL
But consumer advocates backed Treasury's proposal, saying it would aid OFAC's efforts and give consumers worthwhile information.
``The consumers who patronize these companies and the investors who evaluate the companies' management are entitled to full disclosure of civil penalties imposed upon, and settlements accepted by, businesses because of OFAC's enforcement efforts,'' said advocacy group Public Citizen.
There were even some in the banking industry in favor of the change.
An individual named Carol D'Angio, who described herself as a compliance officer with a large national bank, said she ``absolutely agreed'' with the idea.
``It is the role of every American to join in the battle that the U.S. Government battles every day -- whether it be terrorists or money launderers. By approving the proposed rule, financial institutions will be forced to learn the requirements set forth by OFAC and abide by them,'' she wrote.
© 2002 Reuters
