Commerzbank Agrees US$1.45bn Penalty to Settle US Sanctions Charges
US officials said that Commerzbank has agreed to pay US$1.45bn to settle criminal charges that it concealed transactions with Iran and Sudan and conspired with camera-maker Olympus in a major accounting fraud.
Germany’s second-largest had German bank admitted and accepted responsibility for illegal conduct under US sanctions and bank secrecy laws, the Justice Department announced.
Prosecutors said over the period 2002 to 2008, Commerzbank systematically processed transactions with Iranian and Sudanese entities in violation of US sanctions. Bank staff ignored warnings that the transactions were problematic as well as advice from auditors to alert US staff.
Commerzbank stripped out information identifying sanctioned parties for some 60,000 transactions totalling US$253bn involving the two countries, the New York Department of Financial Services (DFS) stated.
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 committed these crimes, even though managers inside the bank raised red flags about its sanctions-violating practices,” said assistant attorney general Leslie Caldwell.
“Financial institutions must heed this message: banks that operate in the United States must comply with our laws, and banks that ignore the warnings of those charged with compliance will pay a very steep price.”
In the Olympus case, Commerzbank loaned money to off-balance-sheet entities created by the company to disguise losses. Commerzbank transacted more than US$1.6bn through its New York division to further the fraud, said the Justice Department.
In September 2012, Olympus and three senior executives pled guilty in Japan to inflating the company’s profits by about US$1.7bn. As with the sanctioned transactions, some Commerzbank officials wrote expressing their concerns that the work on behalf of Olympus was illegal, but those concerns went unheeded.
Commerzbank said that the bank would take a further €338m charge in addition to prior provisions.
“We take these violations very seriously and deeply regret the actions that led to these announcements,” said its chief executive (CEO), 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.”