Japan’s Bank of Tokyo-Mitsubishi UFJ agreed to pay $250 million to settle New York state charges that it illegally funneled billions of dollars to countries that are under U.S. sanctions, including Iran, Sudan and Burma.
The settlement is part of a larger effort by government regulators to clamp down on funding for countries under sanction, drug traffickers and terrorists. International banks, including HSBC and Standard Chartered, have in recent years faced stiff penalties for flouting U.S. laws. Critics, however, question whether fines are enough to deter this behavior.
New York’s Department of Financial Services said Thursday that the bank cleared some 28,000 illicit transactions totaling $100 billion from 2002 and 2007. Employees allegedly removed information from wire transfers that could have revealed the identity of the countries blacklisted by the United States.
Prosecutors said the bank went so far as to create written instructions telling employees that “in order to avoid freezing of funds” they should “omit” information alerting authorities to the involvement of an “enemy country.”
“We have and will continue to take a hard line in rooting out misconduct at banks that threatens our national security,” said Benjamin M. Lawsky, head of the New York state banking regulator.
Bank of Tokyo identified the practices six years ago, ended them quickly and alerted regulators to the nearly 30,000 transactions, a bank spokesman said.
Under the agreement, Japan’s largest bank must hire an independent consultant to evaluate its risk controls and report back to the New York financial regulator. The bank must submit a plan to improve its compliance programs, policies and procedures.
The matter falls under the jurisdiction of regulators in New York and Washington.
The Treasury Department handed down its consent order against the Bank of Tokyo in December, fining the institution $8.5 million for transactions that occurred from April 2006 to March 2007. The agency focused on 97 fund transfers totaling $5.8 million.
A Treasury spokesman said the number and value of transactions in its settlement was smaller because the agency zeroed in on violations of federal sanctions. Regulators in New York City took a broader approach by including violations of New York state record-keeping laws.
It is unclear whether the Justice Department will take action against the Japanese bank. Justice officials declined to comment on whether the department was investigating the bank.
This is not the first time the bank has run into trouble for violating anti-money-laundering laws. In 2006, the New York banking department, the Federal Reserve and the Federal Deposit Insurance Corp. hit the bank with enforcement orders for weaknesses in its compliance program. The orders were lifted two years later when regulators decided the bank had cleaned up its act.
The Bank of Tokyo is the latest major international financial institution accused of evading money-laundering controls. In December, British banking giant HSBC handed over $1.9 billion to the Justice Department to resolve allegations that it laundered millions of dollars in drug profits at its Mexican branches. The accusations came to light in a Senate report in July that chastised regulators for failing to take more aggressive actions against the bank.
Later last summer, London-based Standard Chartered Bank took the heat when the New York regulators accused the bank of scheming with the Iranian government to launder $250 billion from 2001 to 2007. The bank agreed to pay $340 million to settle those claims but said only a fraction of the transactions identified had slipped through the cracks.
The case thrust agency chief Lawsky into the spotlight, drawing the ire of federal regulators for jumping ahead of their investigation into Standard Chartered.
Washington ramped up efforts to root out money laundering after the Sept. 11, 2001, terrorist attacks. The USA Patriot Act of 2002 required Treasury to finger banks and individuals suspected of terrorist links and instructed banks to report illegal transactions.
Federal agencies have reached multimillion-dollar settlements with some of the biggest names in banking, including Credit Suisse and ING.
The Office of the Comptroller of the Currency, for instance, has in the past eight years issued 134 enforcement actions, with penalties totaling $638 million. Those orders focused on violations of the Bank Secrecy Act, a law requiring financial institutions and their employees to combat money laundering.
The Justice Department has launched a series of criminal cases under the act, including one against Wachovia in 2010 for failing to stop millions of dollars of Colombian and Mexican drug money from being laundered through accounts at the bank.