12 Oct 2018
Anti-money laundering expert and former undercover agent Robert Mazur has picked out some interesting aspects of the worrisome role compliance officers played in the Rabobank money laundering scandal in the US, which resulted in the bank being fined hundreds of millions of dollars and its top executives in trouble with the Justice department.
What is startling about this case is that is kicks off with the government finding compliance failings against Rabobank, it penalises the bank and off it goes.
One would expect that the Compliance department would start afresh with a determination to avoid trouble and keep in line with the rules.
But the tale doesn’t go that way.
Instead the bank ends up in trouble – again – and it’s in part thanks to its Compliance department, which is designed to prevent, and not cause, trouble.
Compliance office shake-up
Basically, the story goes back to when Rabobank in the US processed over $360 million in illicit funds, and attempted to cover up or hide the scheme from regulators.
It’s been established that at least $100 million in suspicious deposits by high-risk customers at the bank’s units along the US/Mexico border went unreported to authorities.
“The criminal conduct publicly disclosed to date lies strictly with compliance officers who failed to clean up the dirty transactions that, by their nature, could only have happened if the account relationship managers working with the customers were sound asleep during the years that their customers brought hundreds of millions in cash,” Mazur explains in Compliance Complete.
He points that Rabobank’s problems in the United States go back to over a decade ago, when its compliance failures were known by the Office of the Comptroller of the Currency (OCC).
In 2007, OCC chief compliance officer Laura Akahoshi and her colleagues flagged the bank’s compliance irregularities, which resulted in the bank paying a $50,000 fine.
In a stunning move, weeks after it admitted to weaknesses in its anti-money laundering obligations under the Bank Secrecy Act (BSA), Rabobank hired Akahoshi as its chief compliance officer for its Roseville, California department.
She was then appointed to the role of compliance manager of Rabobank International in the Netherlands, and her replacement in California settled into her previous role at the bank.
Mazur highlights a key point: that a serious problem arose – Akahoshi’s replacement (at Rabobank California) found that the bank’s compliance programme had features which were in violation of the law. This employee became a whistleblower, reporting the illegal happenings at Rabobank to the OCC.
Following this reporting, OCC examiners repeatedly asked the bank’s executives and Akahoshi for an outside audit firm’s report. But, according to the OCC, Akahoshi conspired with others, including an AML monitoring manager and the bank’s general counsel, to try to ‘conceal the bank’s violations and the existence of the audit firm’s report.’
In hot soup again
Around December 2013, the OCC issued a consent order that outlined deficiencies with the bank’s overall BSA/AML compliance, and in December 2017, criminal charges were filed against a vice president and anti-money laundering investigations manager, who admitted that he, Akahoshi and other senior executives at the firm ‘suppressed investigations into suspicious transactions conducted at the bank.’
The same year – December 2017 – the US government allowed this vice president to enter into a deferred prosecution agreement, potentially avoiding jail.
Following the agreement, among other things, the bank paid a $368.7 million penalty, and in April 2018, the OCC filed a notice calling for Akahoshi to be banned from ‘participating in any manner in the conduct of a federally insured institution in the U.S. and assessed her with a $50,000 civil penalty.’
As of May 2018, it was reported that the Justice department is considering possible charges against the bank, and some executives.
“In the Rabobank case it appears that authorities are taking the time to document the acts of individuals, and where they constitute a crime, are prosecuting those in the compliance department of a bank, and hopefully other departments, that intentionally broke the law,” Mazur said.
“Although a light has been shinned on individual responsibility in the Rabobank affair, the question is, will that light be cast broadly enough to learn the full picture?”
Read more about Robert Mazur’s Rabobank analysis, published in Compliance Complete.
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