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(e) Reaching Agreement Despite the HBEU deadline announced by Rod Moxley, that MPD would stop processing concealed Iranian transactions after December 31, 2003, no agreement was reached by that date on how to process the transactions. Documents obtained by the Subcommittee indicate that HBEU did not adhere to its deadline, but continued to process Iranian transactions using cover payments and deleting any references to Iran in the payment instructions. On March 10, 2004, after an Iranian transaction was detected and halted in London, HBEU MPD head Malcolm Eastwood wrote: “I remain extremely uncomfortable with the practice of amending Iranian payment orders for whatever means.” 814 Mr. Eastwood advised HBEU Compliance and Institutional Banking to resolve the issue as soon as possible and remarked that his Compliance certificate is “heavily caveated to reflect that we are not compliant in respect of Iran.” 815 Mr. Eastwood sent a copy of his email to HSBC Group AML head Susan Wright who forwarded it to David Bagley. The following day, Mr. Bagley responded to Mr. Eastwood by writing that he understood and shared his concerns, but believed his comments underestimated “the complexity of the OFAC regulation, and the competing competitive pressures across the Group.” 816 Mr. Bagley also wrote that one reason for the slow resolution was that “HBUS was unaware that any arrangements existed with Iranian banks.” On March 22, 2004, more than two years after becoming head of HSBC Group Compliance, David Bagley confronted HBME Deputy Chairman David Hodgkinson about the need to change how HBME was handling U.S. dollar clearing activity for Iranian banks. 817 Mr. Bagley wrote that he was “uncomfortable with this activity in its current form,” and “the amount of revenue may not justify” the “additional work and investment” required, “nor would it justify ru[n]ning the reputational and regulatory risk in the US.” He expressed his willingness to discuss the issue further, but suggested “that any such conversation take place over the telephone, as we are seeking to avoid correspondence with HBUS on this sensitive issue other than through lawyers so as to preserve privilege.” 818 WOLF Filter Announced. On March 23, 2004, HSBC Group issued a new Group Circular Letter 040021 implementing a major new initiative on “Payment screening.” 819 The circular announced that HSBC Group had developed an internal filter called “WOLF” to screen against terrorists and sanctioned countries and persons. The circular explained:
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3/10/2004 email from HBEU Malcolm Eastwood to MDBK (Midland Bank) Quentin Aylward and others, “ BankMarkazi Payment,” HSBC OCC 8873979-980. 815 Id. at 8873980. 816 3/11/2004 email from HSBC David Bagley to HBEU Malcolm Eastwood and others, “Bank Markazi Payment,” HSBC OCC 8873985-986. 817 3/22/2004 email from HSBC David Bagley to HBME David Hodgkinson and HSBC Warren Leaming, “Iran – Correspondent Banking Services,” HSBC OCC 8873995-997. 818 Id. 819 3/23/2004 “GCL 040021: Payment screening,” prepared by HSBC Group, HSBC OCC 0953080-084.