Commerzbank to pay $1.45bn for US sanctions charges

Commerzbank will pay $1.45 billion to settle criminal charges it hid transactions with Iran and Sudan and conspired with camera-maker Olympus on a massive accounting fraud, US officials announced Thursday.
The second-largest German bank admitted and accepted responsibility for illegal conduct under US sanctions and bank secrecy laws, the Justice Department said.
Prosecutors described the Commerzbank routinely flouting of US sanctions on the two countries and decried shoddy oversight that fell far short of standards for detecting and reporting suspicious activity.
"When there was profit to be made, Commerzbank turned a blind eye to its anti-money laundering compliance responsibilities," said Benjamin Lawsky, superintendent of financial services in New York state.
"Bank employees helped facilitate transactions for sanctioned clients such as Iran and Sudan, and a company engaged in accounting fraud."
Commerzbank will pay about $1.15 billion in fines and forfeited sums to US and New York state agencies and another $300 million to victims of the Olympus fraud.
Prosecutors said Commerzbank from 2002 through 2008 systematically processed transactions with Iranian and Sudanese entities in violation of US sanctions. Bank staff ignored warnings that the transactions were problematic and did not heed advice from auditors to alert US staff, Justice said.  
The bank admitted in the federal deferred prosecution agreement to "knowingly and wilfully" moving $263 million through the US financial system on behalf of the two countries.
Commerzbank stripped out information identifying sanctioned parties, even designating a special team of employees to manually process Iranian identifying information that might trigger red flags that would delay or block transactions, the New York agency said.
The bank also made loans and handled transfers for Olympus, helping the company to hide hundreds of millions of dollars worth of losses in violation of the US Bank Secrecy Act and anti-money laundering rules.
Commerzbank loaned money to off-balance-sheet entities created by Olympus to disguise losses. It also transacted more than $1.6 billion through its New York division to further the fraud, the Justice Department said.
"Commerzbank enabled Olympus to evade detection for years. And worse yet, failed to create a process to prevent this criminal behavior," said FBI assistant director-in-charge Diego Rodriguez.
In September 2012, Olympus and three senior executives pled guilty in Japan to inflating the company’s profits by about $1.7 billion.
As with the sanctioned transactions, some Commerzbank officials expressed worry in writing that the work on behalf of Olympus was illegal, but those concerns were not heeded.
A Commerzbank statement said the bank would take an additional 338 million euro ($359 million) charge in addition to prior provisions.
"We take these violations very seriously and deeply regret the actions that led to today's announcements," said Commerzbank chief executive Martin Blessing.
"We have made, and will continue to make, changes to our systems, training and personnel to address the deficiencies identified by US and New York authorities."
Under a deferred prosecution agreement, the Justice Department will seek dismissal of the criminal case after three years if Commerzbank meets requirements on reporting offenses and improving internal program.
The bank agreed to install an independent monitor and terminate five New York employees to settle charges with Lawsky's office.
Source: AFP