WHEN he eventually retires, Robert Morgenthau, the 89-year-old district attorney of Manhattan, will collect plaudits for the leading role he has played in cleaning up the organised crime that once plagued New York.

In more recent years, the fearsome public servant has moved on from cracking rubbish-collection rackets and the like. He exposed and prosecuted the BCCI scandal and corporate plundering at Tyco. Now his attention has turned to illegal activity of a different, more international, kind.

The $350m payment made by Lloyds TSB last week to settle charges that it faked records of banking transfers for Iranian and Sudanese customers is part of a wider campaign to stop the bankrolling of terrorism.

Since the September 11 attacks on the World Trade Center, American lawmakers have attempted to clamp down on money laundering as well as toughening economic sanctions against countries considered a threat to US security.

Pressure on banks has prompted many to give up or limit their dealings with Tehran. However, a paper trail from 2006 led investigators to Lloyds TSB. Another nine leading banks are still being probed about similar activities. Among them are Barclays and Credit Suisse, which said last year that they had been questioned over payments from blacklisted states that had been processed through New York.

The American authorities concluded that between 1995 and January 2007, Lloyds, in both Britain and Dubai, “falsified outgoing US wire transfers that involved countries or persons on US sanctions lists”.

The process — known as stripping — involved deliberately removing customer information so that money could pass through filters at American financial institutions.

“Lloyds’ criminal conduct was designed to assist its clients in avoiding detection by filters employed by US banks because of United States economic sanctions against Iran, Sudan and Libya,” according to the agreement between the government and Lloyds that was filed in the US District Court in Washington.

America suspects the money has been used to fund Iran’s secret nuclear missile programme, although Iran denies such a programme exists.

“The Iranian banks have money on deposit in London with Lloyds,” Morgenthau said at a press briefing last week. “They were having Lloyds send the money to the US and beyond and stripping the identification.” Morgenthau said “several billion” dollars went through New York banks, in violation of federal law.

Morgenthau said the Iranian banks involved included Bank Sarterat and Bank Melli, as well as the Sudanese National Bank of Khartoum. Last month American authorities seized the assets of Assa, a company that part-owns a Manhattan tower block, because they suspect it is a front for Melli.

The US Justice Department said Lloyds’ offices removed information such as customer names, bank names and addresses so wire transfers would not be flagged and blocked as improper by American financial institutions.

More than $350m in transactions was processed by American banks that might have otherwise been blocked or rejected. The funds were used to buy goods and services from American companies.

Lloyds decided to stop providing stripping services to Iranian banks with branches in Britain in 2003, but continued to do so for four Sudanese banks until early 2007.

Last year it set aside £180m to cover a possible settlement in America. “We are committed to running our business with the highest levels of integrity and regulatory compliance across all our operations and have undertaken a range of significant steps to further enhance our compliance programmes,” Lloyds said in a statement last Friday.

Under its agreement, Lloyds will co-operate fully with the authorities for the next two years, but no staff will be charged with a crime unless evidence is uncovered that they sent money to terrorist groups.

It is a rare blot on the copybook of the bank, which the British government used to rescue HBOS last year. The payment will also embarrass Lloyds’ American-born chief executive Eric Daniels, a native of Montana.

Morgenthau may have brought Lloyds to justice but his appetite for crime-busting shows no sign of waning. In his ninetieth year he is preparing to run for re-election for the post he has held since 1975.

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