SAN DIEGO (CN) – The California subsidiary of Netherlands-based Rabobank Wednesday pleaded guilty to a single conspiracy charge related to its anti-money laundering program, an agreement in which the bank forfeited over $368 million – the largest financial penalty ever paid in the Southern District of California.
Rabobank National Association admitted to conspiring with several former executives to defraud the United States by unlawfully obstructing regulators and impeding an examination of its operations throughout California by the Treasury Department’s Office of the Comptroller of the Currency, or OCC.
The bank’s deficient anti-money laundering program allowed hundreds of millions in untraceable cash, sourced from Mexico and elsewhere, to be deposited into its rural bank branches in Imperial County, California, including its Calexico and Tecate bank branches. The money was wired via wire transfers, checks and cash transactions without notifying federal regulators of the suspicious activity as required by law, according to the U.S. Attorney’s Office.
The suspicious transactions were made in connection to international drug trafficking, organized crime and money laundering, yet Rabobank solicited businesses and individuals conducting the transactions and failed to adequately monitor or investigate the suspicious bank transactions, according to the U.S. Attorney’s Office.
“Rabobank had an obligation to shine light on suspected drug traffickers, money launderers and organized crime,” U.S. Attorney Adam Braverman of the Southern District of California said in a statement.
“Instead, this bank deliberately allowed hundreds of millions of dollars of suspicious cash transactions and wire transfers to flow through its branches and took measures to hide this activity from regulators.”
Rabobank executives actively sought to deceive regulators as to the true state of its operations when the OCC “was on the verge” of discovering deficiencies in the program, in an attempt to avoid regulatory sanctions that had been imposed on Rabobank in 2006 and 2008 for “nearly identical failures.”
The guilty plea comes less than two months after former Rabobank vice president George Martin entered into a guilty plea in the Southern District for his role in aiding and abetting the Imperial Valley branches failure to prevent money laundering.
U.S. banks are required to maintain anti-money laundering programs under the Bank Secrecy Act. They must investigate suspicious accounts or transactions and report any troublesome activity to the Treasury Department.
Rabobank admitted it had policies and procedures in place to prevent adequate investigations into suspicious transactions, customers and accounts.
One such policy included a “verified list” of customers who avoided further review even when a transaction triggered an internal alert or was suspicious. The bank also instructed its staff to increase the number of accounts included on the “verified list” – jumping from less than 10 verified customers in 2009 to more than 1,000 verified customers in 2012.
Rabobank’s branches near the U.S.-Mexico border were heavily dependent on cash deposits from Mexico; its Calexico branch, two blocks from the border, was the highest performing bank branch in the region due to cash deposits likely tied to illicit conduct, according to the U.S. Attorney’s Office.
The bank ramped up efforts to seek cash customers after the Mexican government announced in June 2010 it was restricting the amount of U.S. cash deposits Mexican banks could receive in effort stop laundering of crime proceeds tied to narcotics trafficking and organized crime, according to an 18-page charging document.
The bank also terminated two employees who asked questions about adequacy of the Bank Secrecy Act anti-money laundering programs at Rabobank.