© 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
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By Jesús Aguado and Iain Withers
MADRID/LONDON (Reuters) -Santander and Lloyds (LON:) shares fell after the Financial Times (FT) newspaper reported that Iran used accounts held at the banks in the UK to covertly move money around the world in a sanctions-evasion scheme backed by Iran’s intelligence services.
Lloyds and Santander (BME:) UK provided accounts to British front companies 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% at 1328 GMT, while shares in Lloyds declined 0.7%. 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.
On Monday a Santander spokesperson said that the bank was not in breach of U.S. sanctions based on its own 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 U.S. authorities,” the spokesperson said.
A Lloyds spokesperson said the group sought to ensure compliance with sanctions laws and was committed to adhering to economic crime laws and regulations, adding it could not comment on individual customers.
European lenders, such as Unicredit (BIT:) and Standard Chartered (OTC:), 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 US 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 US 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.
“Where we identify sanctions risks, we will investigate and take appropriate action,” the spokesperson said.
