Clearstream

Between 2001 and 2002, two books were published by co-authors Denis Robert and Ernest Backes, entitled Révélation$ and La Boîte Noire, accusing Clearstream of being a money laundering organisation and the worldwide centre for international financial crime committed by major banks, shell companies, and organised crime all over the world. An investigation opened by the Luxembourg authorities in 2001 found no evidence to support the authors' allegations, and the case was dismissed in 2004.[10]

In 2004, a list leaked to a French judge indicated that Clearstream was a money laundering organisation covering illegal activities of French businessmen who were involved in the sale of warships by the French defence giant Thales (known as Thomson-CSF before 2000) to Taiwan, and related bribes paid to French officials and businessmen. An investigation that included the search of Clearstream's premises and an examination of accounts in 2004 found no evidence supporting the accusations.[11]

In the same year, additional anonymous letters and CD-Roms sent to French judges accused Clearstream of running secret accounts for criminals and senior French politicians. In late 2005, French investigating authorities officially declared the documents forgeries and dismissed the case.[12]

The controversy inspired the film The Clearstream Affair (2014).[13]

In 2008, several groups of plaintiffs commenced enforcement proceedings in the US to satisfy judgments which they had obtained against Iran by restraining certain positions held in a Clearstream securities account with its intermediary bank in the US, and asking for handover of the assets. Clearstream challenged the restraints and the handover.[14]

In 2011, the plaintiffs filed additional claims, this time directly against Clearstream, for damages of USD 250 million in connection with the purported wrongful conveyance of some of the restrained positions. Clearstream entered into a settlement agreement with the plaintiffs that became effective in 2013. The settlement provided for the dismissal of the direct claims against Clearstream, and that the plaintiffs will not further sue Clearstream for damages and in return, Clearstream agreed to not further appeal an order directing the turnover of the restrained customer's assets to the plaintiffs.[15]

In 2013, a number of US plaintiffs from the 2011 case, as well as other US plaintiffs, filed a complaint targeting certain blocked assets that Clearstream holds as a custodian in Luxembourg. In 2015, the US court issued a decision dismissing the lawsuit.[16]

Arising from the above, the U.S. Treasury Department Office of Foreign Assets Control (OFAC) investigated certain securities' transfers in 2008 within Clearstream's settlement systems regarding US Iran sanctions regulations. These 2008 transfers had been undertaken as part of the decision taken by Clearstream in 2007 to close its Iranian customers' accounts. In 2013 Clearstream entered into settlement talks with OFAC.[17] The matter was resolved in 2014 through a settlement and payment of USD 151.9 million that does not constitute a final determination that a violation of Iran sanctions had occurred.[18]

The Russian depository blocked all securities held in Clearstream's account at the Russian depository, on 1 March 2022.[19] The Russian depository also froze payments on securities of Russian issuers from being made to non-Russian individuals and entities.[19]

After the 2022 Russian invasion of Ukraine, the Russian National Settlement Depository said on 25 March 2022 that Clearstream had blocked its account.[20]

Also, the ruble bridge between Clearstream and Euroclear was closed.[19] Furthermore, Clearstream stopped settling trades in Russian securities.[21]

Clearstream is responsible for the management, safekeeping/custody and administration of securities (assets) under custody. Services include income and redemption payments, corporate actions as well as tax and proxy voting.

The majority of securities safekept by Clearstream are immobilised. Securities are reflected in book-entry form in the accounts of customers at Clearstream regardless of whether they are held in physical or dematerialised form. This means that they are no longer represented by physical certificates, but instead by data entered into the Clearstream systems.

Securities financing is the ability to borrow or lend cash or securities against collateral. In securities financing, collateral comprises assets given as a guarantee by a borrower to secure a securities loan and subject to seizure in the event of default. Collateral management refers to the handling of all tasks related to the monitoring of collateral posted by a borrower to meet a financial obligation (optimisation, substitution, top-up, withdrawal, settlement instruction, reporting, processing of margin calls and returns, notification of corporate events, etc.).

Clearstream's collateral management, securities lending and borrowing services are gathered under the Global Liquidity Hub.[26] It provides a pool of liquidity through links to agent banks, trading platforms, clearing houses and other market infrastructures.

Clearstream is a member of the Liquidity Alliance, which was established in January 2013 as a platform for CSDs to collaborate on collateral management. It was founded by ASX, Cetip, Clearstream, Iberclear and Strate.[27]

Clearstream has developed the world's largest cross-border fund processing platform, called Vestima.[28] It handles all types of funds, from mutual funds to exchange-traded funds (ETFs) and hedge funds.

In addition to providing access to all fund types, Vestima supports their cross-border distribution. Services offered by Vestima include order routing, centralised delivery versus payment (DVP) settlement, safekeeping, asset servicing and collateral management.[29]

ICSDs and CSDs are often used to bring a security issue to the market, as they possess the necessary infrastructure for distributing the securities to the investors as well as for settlement and safekeeping. Clearstream's ICSD also provides custody services, which means that the security can be serviced throughout its entire lifecycle. Clearstream provides the infrastructure which enables issuers to reach investors worldwide.

Clearstream's services include eligibility assessments, issuance and distribution of domestic, foreign and international (i.e. Eurobonds) new issues of global and domestic instruments: certificates of deposit, depository receipts, treasury bills, commercial papers, short-term and medium-term notes, bonds, equities, warrants, equity-linked notes and investment fund shares.

Clearstream's ICSD settles trades in international securities and in domestic securities traded across borders. The CSDs settle domestic transactions in the German and Luxembourgish markets. Transactions between the two ICSDs Clearstream and Euroclear are settled via an electronic communications platform, called the Bridge.[32]

Clearstream operates a delivery versus payment settlement system, ensuring simultaneous settlement of securities and cash transfers on a gross (trade-by-trade) basis. This helps to minimise the risk associated with the settlement of securities.[33]