Wednesday, October 4, 2023
Courthouse News Service
Wednesday, October 4, 2023 | Back issues
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Billion-Dollar Penalty for Bank’s Money Washing

MANHATTAN (CN) - Commerzbank must pay $1.45 billion to five state and federal regulators for facilitating Iran and the Sudan's laundering of money, as well as helping the Japanese optics manufacturer Olympus pull off a massive accounting fraud.

At $610 million, New York's Department of Financial Services takes the lion's share of the settlements with the Frankfurt bank on Thursday.

The U.S. Attorney's Office for the Southern District of New York meanwhile will collect $300 million, the Federal Reserve takes $200 million, and Commerzbank owes another $172 million to both the Manhattan District Attorney's Office and U.S. Department of Justice.

The penalties resolve six years of anti-money laundering violations, from 2002 to 2008, according to the deferred prosecution agreement.

Prosecutors point to one email from 2003 to show that Commerzbank hid the violations from its New York branch.

The email said: "If for whatever reason CB New York inquires why our turnover has increase[d] so dramatically, under no circumstances may anyone mention that there is a connection to the clearing of Iranian banks!!!!!!!!!!!!!" (Punctuation in original.)

New York's Financial Services Superintendent Benjamin Lawsky called it "especially disturbing" that Commerzbank's employees "sought to alter the bank's transaction monitoring system so that it would create fewer 'red flag' alerts about potential misconduct, which highlights a potential broader problem in the banking industry."

"When there was profit to be made, Commerzbank turned a blind eye to its anti-money laundering compliance responsibilities," Lawsky said in a statement.

Commerzbank did business with "Sudanese sanctioned entities" between 2002 and 2007, according to U.S. Attorney Preet Bharara's office.

The Olympus fraud, which took place between the late 1990s and 2011, relied on Commerzbank's private banking subsidiary in Singapore.

Commerzbank facilitated $1.6 billion in Olympus transactions during this period.

One of the Singapore-based Commerzbank executives, Chan Ming Fong, pleaded guilty in Manhattan on federal charges of conspiracy to commit wire fraud, Bharara noted.

That guilty plea is responsible for the "multi-year investigation" that led to Thursday's settlement, he added.

"Institutions, not just individuals, have an obligation to follow the law, and anti-money laundering laws in particular are critical for financial institutions to follow," Bharara said in a statement.

In addition to its financial penalties, Commerzbank's deferred-prosecution agreement forces the bank to accept responsibility in a statement of facts and agree to continue reforming its anti-money laundering practices.

Commerzbank's chief executive Martin Blessing said in a statement that the bank takes "these violations very seriously and deeply regret the actions that led to today's announcements."

"Today's settlement concludes a long and arduous process for all involved. Our focus now is on addressing the underlying issues and maintaining the trust of all of our stakeholders - our clients, our shareholders, our regulators and our employees," Blessing added.

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