B of A to Pay $220,000 Fine to Settle Boycott Charges

Bank of America said Friday that it has agreed to pay $220,000 to settle Commerce Department charges that it violated federal rules governing illegal trade boycotts with other countries.

The fine is the largest ever for a U.S. bank involving the specific type of allegation directed at Bank of America, a Commerce Department spokesman said.

The agency charged that the San Francisco-based bank violated certain Export Administration Act provisions. Those provisions prohibit U.S. banks from acting on international letters of credit--issued by foreign banks on behalf of foreign companies doing business with U.S. firms--that require U.S. firms to carry out boycotts considered illegal by the United States.

Specifically, the Commerce Department alleged that Bank of America made payments on a letter of credit issued by the National Bank of Kuwait on behalf of an unidentified Kuwaiti company. The Kuwaiti company, as a condition of purchasing goods from an unidentified U.S. company, required that the U.S. company not do business with certain other U.S. companies.

Those other U.S. companies apparently do business with Israel, the Commerce Department spokesman said. Kuwait and certain other Arab countries boycott goods and services from Israel and maintain a blacklist of companies doing business with Israel.

The regulations in this case apply to all foreign boycotts not supported by the United States and directed at countries friendly to the United States, the Commerce Department said.

“Banks become a focal point in such cases because of their role in transmitting boycotts from foreign buyers to U.S. sellers,” another Commerce Department spokesman said.

The department noted, however, that Bank of America cooperated in the matter, among other things reporting the letter to the department.

Bank of America, in paying the fine as part of a consent agreement with the Commerce Department, said it neither admitted nor denied the allegations.

“Bank of America’s policies explicitly forbid discrimination on the basis of sex, race, creed, religion or national origin,” George W. Coombe Jr., the bank’s executive vice president and general counsel, said in a statement.

“Unfortunately, out of the thousands of letters of credit handled and reviewed by the bank each year, this one inadvertently slipped through the compliance net,” Coombe said. He said the bank has taken steps since 1985, when the violations occurred, to ensure that similar incidents do not recur, including increased training for personnel responsible for reviewing letters of credit.

A Commerce Department spokesman, in noting that Bank of America’s payment was the largest of its type ever, said New York’s Citibank paid a larger fine in 1983 of $323,000. But that involved alleged failure to report an illegal letter of credit, the spokesman said.