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Source: The Guardian

Feb 5, 2024

Lloyds and Santander accused of providing accounts for Iranian front companies

Both banks deny helping Tehran-controlled oil company to move money in breach of sanctions

By Kalyeena Makortoff

Two of the UK’s largest lenders, Santander UK and Lloyds Banking Group, allegedly held bank accounts for front companies that helped Iranian entities evade US sanctions, according to reports.

The news has rattled investors, who sold off shares in the two banks on Monday morning, amid fears that the lenders could face penalties if they are found to have in any way assisted Iran’s state-controlled Petrochemical Commercial Company (PCC).

The Tehran-controlled firm has been accused by US officials of raising hundreds of millions of dollars for Iran’s Revolutionary Guards al-Quds Force, and working with Russian intelligence agencies. PCC and its British subsidiary have been under US sanctions since November 2018.

PCC is alleged to have moved money through a Santander UK business bank account by using a front company registered to a detached house in Surrey, according to documents seen by the Financial Times.

It also used a separate front company to move money through an account at Lloyds Banking Group, the newspaper claimed.

The report will raise fresh concerns about how the UK’s financial system could be being used to launder cash or hide illicit payments.

“This is, frankly, a shocking failure to act in lockstep with our allies to shut down the financing of a hostile regime,” said Liam Byrne, Labour MP and chair of the business and trade committee. “It beggars belief that a business sanctioned by the US is freely trading in London.”

He wrote on the X platform that MPs on the committee would be “cross-examining ministers, Companies House, National Crime Agency, HMRC & SFO [Serious Fraud Office] to explain how the hell this happened” when it holds an evidence session on economic crime on Tuesday morning.

The news took a toll on the share price of the two lenders, with Lloyds tumbling as much as 2% in morning trading, before recouping some losses to trade lower by 0.4% by early afternoon. Shares in Santander, which is listed in Spain, fell by more than 3%.

Santander said it had not broken any rules. “Santander is not in breach of US sanctions based on our investigation. We have policies and procedures in place to ensure we comply with sanctions requirements and will continue to engage proactively with relevant UK and US authorities.”

Lloyds is also pushing back against the claims outlined in the FT report, and does not believe it breached any sanctions, according to a source close to the matter.

A spokesperson for the banking group said Lloyds could not comment on individual customers, or on whether suspicious activity reports had been flagged to authorities in relation to the accounts in question.

“The group’s activities are conducted to ensure compliance with applicable sanctions laws. We are committed to adhering to all legislative and regulatory requirements as they relate to economic crime,” Lloyds said.

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