Under US law, banks with an office in the US are banned from doing business in dollars with countries black listed by the American government.
The conflict goes back to July 2006 when the Office of Foreign Assets Control (OFAC) of the US placed a subsidiary of ING on a black for doing business with Cuba.
From 1993 to 2007 ING operated a joint venture under the name of the Netherlands Caribbean Bank (NCB) out of Willemstad Curacao. ING had a 50% share in the venture and the other 50% was held by two financial institutions of the Cuban state. NCB also had an office in Havana.
After nearly 14 years doing business in Cuba, ING closed its NCB operation at the end of 2007. It claimed at the time that its decision had nothing to do with the threat of impending legal action by the US authorities.
Reporting a 50% lower net profit for first quarter 2012, as compared to first quarter 2011, ING said it had reserved 307 million euros in connection with a ”possible settlement” of the Cuban affair. This brought earnings down by half.
A spokesman of the bank is reported as saying this figure would probably cover most of the claim by the US supervisory authority.
ABN Amro, a major competitor of ING, ran afoul of the OFAC in 2005 when it was fined 64.5 million euros for operating a subsidiary in Dubai, allegedly involved in (for the US), questionable financial transactions with Libya and Iran.
On the bright side, investors decided ING had done not too badly in the first quarter of this year. Despite the extra charge on earnings, investors ignored hiccup and ING shares rose 1.8% on the AEX in Wednesday 9 May when the bank’s first quarter 2012 figures were released.
(HT Translation from the Dutch newspaper “De Volkskrant” May 10, 2012).