AG James, SDNY Investigation Results in $51 Million Settlement

NEW YORK – Attorney General Letitia James today announced the resolution of an investigation into the Industrial Bank of Korea (IBK) for allowing more than $1 billion to be illegally transferred to the Government of Iran. The six-year investigation, led by the New York Attorney General’s Office (NYAG) and the United States Attorneys’ Office for the Southern District of New York (SDNY), revealed that due to IBK’s deficient anti-money laundering programs, IBK customer Kenneth Zong and the companies he owned and/or controlled, were able to illegally transfer more than one billion U.S. dollars for the Government of Iran using financial institutions located in New York. As part of the agreements, IBK will forfeit $51 million dollars.

“Financial institutions are not above the law,” said Attorney General James. “I will never hesitate to use the vast powers of this office to hold accountable those who try to skirt our laws to enrich themselves or the banks that act as a conduit for this illegal conduct.”

The NYAG has resolved the investigation into IBK with a Non-Prosecution Agreement and SDNY has resolved their investigation with a Deferred Prosecution Agreement.

Since 2014, the NYAG Crime Proceeds Strike Force, has been conducting an investigation alongside SDNY into various violations of law by IBK, including money laundering and bank fraud related to prohibited transactions with Iran. IBK is a South Korean government-owned bank that has one United States branch, which is located in New York (IBKNY), and provides various services to customers, including serving as a correspondent bank for transactions processed on behalf of IBK’s customers in Korea.

From January 2011 to July 2011, Kenneth Zong and several Iranian co-conspirators exploited bank accounts that had been established at IBK and at another bank to permit certain forms of trade between Korea-based entities and Iran, to unlawfully transfer U.S. Dollars to Iranian-controlled entities. They used Korean Won-denominated accounts held by the Central Bank of Iran at IBK. This system allows private Korean businesses to open accounts to conduct permissible trade with Iran using Won from the Central Bank of Iran’s Won Account.

The NYAG and SDNY found that from 2011 to at least 2014, IBK and IBKNY, violated the law by willfully failing to establish, implement, and maintain an adequate anti-money laundering program at IBKNY to prevent this illegal transfer of funds. This failure resulted in the processing through IBKNY and other U.S. financial institutions of approximately $1 billion on behalf of one or more IBK customers.

Kenneth Zong was prosecuted by the Republic of South Korea and after being convicted of certain crimes has not been permitted to leave the country. Zong has also been indicted by the U.S. Attorney’s Office in Anchorage Alaska for money laundering and other related charges.

The case was investigated by Attorney General Investigators Vincent Gisonti and Steven Pratt under the supervision of Supervising Investigator Michael Leahy. The Investigations Bureau is led by Chief Oliver Pu-Folks.

The case is being prosecuted by Gary T. Fishman, Director of the Crime Proceeds Strike Force and Special Advisor to the Criminal Justice Division. Assisting on the case is Legal Support Analyst Walker Halstad. The Division of Criminal Justice is led by Chief Deputy Attorney General José Maldonado.