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Santander, Lloyds' shares hit by report Iran used accounts to evade sanctions

Published 02/05/2024, 03:53 AM
Updated 02/05/2024, 10:40 AM
© Reuters. FILE PHOTO: A woman looks at her phone as she walks past a branch of Lloyds bank in London, Britain, July 20, 2018. REUTERS/Toby Melville/File Photo

By Jesús Aguado and Iain Withers

MADRID/LONDON (Reuters) -Santander and Lloyds (LON:LLOY) shares fell on Monday after the Financial Times (FT) newspaper reported that Iran used accounts held at the banks in the United Kingdom to covertly move money around the world in a sanctions-evasion scheme backed by Iran's intelligence services.

Lloyds and Santander (BME:SAN) UK provided accounts to British front companies allegedly secretly owned by a sanctioned Iranian petrochemicals company based in London, the FT reported citing documents the newspaper had obtained.

Shares in Madrid-based parent Santander fell as much as 6.1% and were down 4.9% at 1503 GMT, wiping off around 3 billion euros in value from the euro zone's second biggest lender by market capitalisation, according to data from LSEG, while shares in Lloyds declined 0.5%.

Santander shares rose more than 6% last week following 2023 earnings that beat forecasts.

"The market must be realising that they may be fined," said Nuria Alvarez, an analyst at Madrid-based broker Renta 4.

Santander and Lloyds said in separate statements that they believed they were not in breach of sanctions, based on their own investigations.

"We have policies and procedures in place to ensure we comply with sanctions requirements and will continue to engage proactively with relevant UK and U.S. authorities," a Santander spokesperson said.

A Lloyds spokesperson said the group was committed to adhering to economic crime laws and regulations, adding it could not comment on individual customers.

British regulator the Financial Conduct Authority said it was in contact with the banks and with the UK's Office of Financial Sanctions Implementation (OFSI).

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The U.S. Treasury Department and Britain's foreign ministry did not immediately reply to requests for comment.

European lenders, such as Unicredit (BIT:CRDI) and Standard Chartered (OTC:SCBFF), have been hit with large penalties over Iran sanctions in the past, with the Italian lender paying $1.3 billion to U.S. authorities to settle probes.

Standard Chartered agreed to pay $1.1 billion in 2019 to U.S. and British authorities over financial transactions that violated sanctions against Iran and other countries.

According to the FT, the Iranian state-controlled Petrochemical Commercial Company was part of a network that the United States accuses of raising hundreds of millions of dollars for the Iranian Revolutionary Guards Quds Force and of working with Russian intelligence agencies.

Both PCC and its British subsidiary PCC UK have been under U.S. sanctions since November 2018, the FT said.

One of its alleged front companies, called Pisco UK, is registered to a detached house in Surrey and used a business account with Santander UK, the FT report said.

A person with knowledge of the situation said that Santander has closed Pisco's account.

Santander declined to comment on specific client relationships.

Alicia Kearns, chair of Britain's foreign affairs committee, said she had repeatedly raised concerns about the need to shut down "cut-outs" of the Iranian Revolutionary Guard Corps operating in the UK, adding that the FT report suggested more needed to be done.

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