Germany's Commerzbank paying $1.45B in settlements over sanctions violations with US, NY

WASHINGTON – Germany’s Commerzbank AG is paying $1.45 billion in agreements with U.S. and New York authorities for alleged violations of U.S. sanctions against countries including Iran and lapses in prevention of money laundering.

Commerzbank will avoid criminal prosecution by the U.S. Justice Department and the New York City district attorney’s office under the agreements announced Thursday. In return, the bank admits responsibility for the violations and promised to establish strict internal controls.

The total $1.45 billion in fines is close to the landmark $1.9 billion settlement by HSBC, Europe’s largest bank, of similar allegations in 2012.

Last year France’s largest bank, BNP Paribas, agreed to pay nearly $9 billion and pleaded guilty to federal and New York state charges of processing transactions for clients in countries under U.S. sanctions.

Regulators have put big banks under greater scrutiny since the financial crisis for moving funds through the U.S. financial system from international criminals and on behalf of nations under U.S. sanctions. Since 2009, major European banks Credit Suisse, Barclays, Lloyds, and ING have all paid big settlements related to allegations that they moved money for individuals or companies on the U.S. sanctions list.

In the case of Commerzbank, the regulators cited violations of sanctions against Iran, Sudan, Burma and Cuba.

The regulators said Commerzbank concealed activity by, for example, stripping out information identifying clients that were subject to sanctions in order to process more than $253 billion in transactions for Iranian and Sudanese companies or organizations. In addition, they said, gaps in Commerzbank’s oversight to prevent money laundering allowed payments to flow through the New York branch that aided an accounting fraud by Japanese optics maker Olympus Corp.

Olympus and several executives pleaded guilty in 2012 to charges related to a $1.7 billion accounting fraud aimed at covering up investment losses.

Commerzbank is paying penalties of $172 million to the Justice Department, $300 million to the U.S. attorney’s office in Manhattan, $200 million to the Federal Reserve, $610 million to New York state and $172 million to the Manhattan district attorney’s office.

The bank also agreed to terminate some employees and install an independent monitor in its agreement with New York state regulators.

Commerzbank, based in Frankfurt, Germany, said in a statement that it has taken steps in recent years to correct the problems and is increasing its staff that oversees bank compliance with regulations.

“We take these violations very seriously and deeply regret the actions that led to today’s announcements,” Commerzbank CEO Martin Blessing said in a statement. “We have made, and will continue to make, changes to our systems, training and personnel to address the deficiencies identified by U.S. and New York authorities.”

Assistant U.S. Attorney General Leslie Caldwell said the bank “concealed hundreds of millions of dollars in transactions prohibited by U.S. sanctions laws on behalf of Iranian and Sudanese businesses.” Commerzbank did so “even though managers inside the bank raised red flags about its sanctions-violating practices,” Caldwell said in a statement.