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MUFG to pay $250 million to New York over transfers to sanctioned states

Bloomberg

Mitsubishi UFJ Financial Group Inc. agreed to pay $250 million to the state of New York to settle claims it transferred billions of dollars for countries facing U.S. sanctions, including Iran, Sudan and Myanmar, financial regulators said Thursday.

Bank of Tokyo-Mitsubishi UFJ Ltd., the main lending unit of Japan’s biggest bank by market value, moved an estimated $100 billion through the state for government and privately owned entities on the Specially Designated Nationals list issued by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) between 2002 and 2007, the New York State Department of Financial Services (DFS) and New York Gov. Andrew Cuomo said in a statement Thursday.

The transfers involved about 28,000 clearing transactions and the bank routinely stripped information from wire transfer messages that could identify countries and people subject to international sanctions, the department said. The agreement follows HSBC Holdings PLC’s record settlement with the U.S. last year, stemming from sanctions aimed at pressuring Iran to halt its nuclear program.

“We have and will continue to take a hard line in rooting out misconduct at banks that threaten our national security,” Benjamin Lawsky, the superintendent of the department, said in the statement.

BTMU instructed employees that “in order to avoid freezing of funds” they should “omit” information that could have identified transactions involving an “enemy country,” the DFS statement said.

The bank in 2007 identified the issues cited by the DFS, voluntarily and promptly ceased the practices, reported them to all of its regulators and has been cooperating fully with them, Mitsubishi UFJ said in a statement Friday to the Tokyo Stock Exchange.

The firm will retain a consultant approved by the department for a one-year compliance review of the bank’s operations, it said.

“We have no higher priority than conducting our business with integrity and full regulatory compliance.” Yuji Okumura, a Tokyo-based spokesman for Mitsubishi UFJ, said Friday. “We will continue to work constructively with DFS, the compliance consultant and all our regulators in our key markets around the world.”

Mitsubishi UFJ is the largest shareholder in New York-based Morgan Stanley and owns San Francisco-based lender UnionBanCal Corp. The firm was the world’s biggest bank when it was created in 2005 through the merger of Mitsubishi Tokyo Financial Group Inc. and UFJ Holdings Inc.

In December, the bank reached a separate agreement with the Foreign Assets Control office, paying $8.6 million to settle charges it had removed information from $5.9 million in fund transfers that might have caused the transfers through the U.S. to be blocked or rejected because they involved sanctioned parties.

The New York settlement focuses on “alleged violations of New York state record-keeping requirements, not alleged violations of federal sanctions law,” which is the processing of transactions for sanctioned parties, John Sullivan, spokesman for OFAC at the Treasury, said in a statement.