both sides of the border, and through the domestic funds transfer system of the beneficiary. foreign banks often operate in jurisdictions that do not impose the same economic sanctions on foreign customers as the united states. transactions involving these sanctioned customers are nonetheless subject to u. s. law if the transaction is routed through the u. s., as is typical for transactions conducted in u. s. dollars. foreign banks that operate in countries without sanctions similar to those imposed by the united states have not always had in place the mechanisms to ensure transactions routed through the u. s. comply with u. s. law. many of the federal reserve ’ s enforcement activities are directed at remedying these situations. one of the federal reserve ’ s most important sanctions enforcement cases involved abn amro. in response to corrective measures the federal reserve imposed on the firm ’ s new york branch in 2004, 2 which required the bank to review certain historical transactions, abn amro discovered numerous payment messages that were sent through its u. s. branch or a u. s. correspondent in a manner designed to circumvent the filters used by the u. s. institution to detect transactions involving sanctioned parties. in particular, the information that identified a u. s. sanctioned party was omitted from the swift payment sent through the u. s., while a complementary payment instruction with sanctioned party information was deliberately routed outside the united states. the federal reserve responded by escalating our enforcement action to a cease and desist order and imposing a substantial penalty on abn amro. 3 the federal reserve ’ s order required abn amro to implement a global compliance program and take specific steps to prevent circumvention of the required u. s. board of governors of the federal reserve system ( 2004 ), “ written agreement with abn amro bank, ” press release, july 26. board of governors of the federal reserve system ( 2005 ), “ agencies release bank supervisory and penalty actions against abn amro bank, n. v., ” press release, december 19. bis central bankers ’ speeches sanctions filters. we coordinated this action with other u. s. and foreign regulators, including the home country supervisor for abn amro. the federal reserve ’ s enforcement action against abn amro triggered important changes in cross - border payment practices. the federal reserve played a key role in this debate and in developing the standards that have since been adopted to improve transparency in crossbor

( like the 2008 financial crisis ) requiring both the government and regulatory intervention. the framework should also broadly indicate the fiscal and regulatory measures to be taken under such conditions in the phases of ( i ) crisis containment and ( ii ) debt restructuring. the rationale for this recommendation was that any regulatory forbearance should be used as a special tool only in the times of crisis. such phases were clearly seen in india during the 2008 financial crisis, when government and rbi both intervened in the real and financial markets with incentives and regulatory forbearance. the working group also observed that the requests for special dispensations and one - time measures are frequently made to rbi for restructuring of a particular sector of economy or industry on the basis that such sectors were facing extraordinary stress or unprecedented adverse conditions. in view of such frequent requests, the one - time measures lose their meaning and these also have adverse impact on the regulatory safeguards of the banking system. in view of this the working group felt that the requests for such regulatory forbearance should not be made a regular feature and any such forbearance should be accompanied with fiscal incentives to ensure the viability of the sector after restructuring. up - gradation of restructured npa accounts the issue of up - gradation of an account downgraded on restructuring arises with the first recommendation of the working group of withdrawal of regulatory forbearance in asset classification. the extant rbi guidelines prescribe that all restructured accounts which have been classified as non - performing assets upon restructuring, would be eligible for up - gradation to the “ standard ” category after observation of “ satisfactory performance ” during the “ specified period ”. further, “ specified period ” is defined as a period of one year from the date when the first payment of interest or instalment of principal falls due under the terms of restructuring package. it was observed by the working group that in some cases of restructuring of multiple credit facilities with moratorium on payment of principal as well as major portion of interest, accounts were upgraded on the basis of payment of interest on a small portion of the debt, say funded interest term loan ( fitl ), for the specified period. the working group further noticed that the account may still have its inherent credit weakness as payment of a small portion of interest does not show the “ satisfactory performance ”. therefore, it was felt that the specified period should be redefined by taking this aspect into consideration. the working group studied the international