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January 9, 2013 8:30 pm
Deutsche Börse’s Clearstream banking subsidiary is in talks with US authorities over potential breaches of sanctions against Iran and could face a settlement fine of up to $340m.
The German exchange group said Clearstream’s discussions with the Office of Foreign Assets Control were connected to securities transfers made in 2008.
The OFAC is part of the US Treasury department. It enforces economic and trade sanctions. Last year Standard Chartered, the British bank, paid $132m to the OFAC as part of a settlement connected to alleged sanctions violations.
Clearstream had been told by the OFAC the securities transfers may have violated US sanctions, Deutsche Börse said in a regulatory filing on Wednesday. If the OFAC issues a “pre-penalty notice” – a usual prelude to a civil financial penalty – it would be for about $340m.
The OFAC had not made a decision on a finding of any violation or the amount of any penalty, Deutsche Börse said. “Clearstream continues to believe that its actions were in compliance with any applicable US sanctions regulations and considers OFAC’s preliminary figure to be unwarranted and excessive.
“Clearstream appreciates the opportunity to engage in substantive discussions with OFAC on the facts and reasons why a penalty should not be imposed or . . . why it should be in a far lesser amount.”
Deutsche Börse said it would back its subsidiary financially if necessary. Clearstream is involved in the “plumbing” of financial markets, providing post-trade services such as settlement and custody of securities, and is central to Deutsche Börse’s growth strategy as tighter regulations require more derivatives trades to be backed by collateral, or insurance for trading. Clearstream has more than €11tn of assets under custody.
“We believe it likely that Deutsche Börse and OFAC will settle at a substantial discount to the $340m indicated penalty, but it will not likely come until the second or third quarter. Nor do we believe that DB will admit wrongdoing,” said Peter Lenardos, an analyst at RBC Capital Markets in London.
Clearstream had made the securities transfers following a decision in 2007 to close Iranian customers’ accounts.
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