Intesa Sanpaolo Fined $235 Million by New York Regulator -- Update
December 15 2016 - 5:50PM
Dow Jones News
By Erica Orden
New York's top banking regulator on Thursday fined Italian bank
Intesa Sanpaolo SpA and its New York branch $235 million for
violations of the state's laws prohibiting money laundering and
bank secrecy, including the masking of transactions involving Iran,
a sanctioned entity.
The bank "specifically trained certain employees" to obscure
money-processing activities involving Iran so those transactions
couldn't be properly flagged, according to the state Department of
Financial Services.
Milan-based Intesa Sanpaolo and its New York branch had "severe
compliance failures" in its transaction-monitoring system and
deliberately concealed information from bank examiners, DFS
said.
In a press release issued Thursday, Intesa Sanpaolo noted the
fine "in relation to a civil penalty imposed on the Bank following
a public supervisory action related to certain weaknesses and
deficiencies in the anti-money-laundering controls, policies, and
procedures of the Bank's New York branch." A spokeswoman for the
bank didn't respond to a request for further comment.
"There is little doubt that the negligent conduct of this bank
is the type of conduct that can fuel international criminal
activity, thereby seriously compromising the security of the
international financial system," DFS Superintendent Maria Vullo
said.
According to a consent order released Thursday, the bank had a
number of flaws in its system designed to detect transactions that
should be taken under review, including an algorithm intended to
search for county names that would create an alert only if the
official county name, and not the commonly-used shortened version,
had appeared. "Russian Federation" would get flagged, for example,
but not "Russia."
If that flaw hadn't existed, at least $9 billion worth of
additional transactions would have been subject to review,
according to an independent consultant, the consent order said.
The consent order also said the bank cleared thousands of
transactions through the New York branch that had signs of
suspicious activity with respect to shell companies.
In 2006, for example, its Luxembourg subsidiary processed a
transaction through the New York branch for a customer registered
at a shell company address in Panama. The address is associated
with Mossack Fonseca & Co., the law firm at the center of the
"Panama Papers" scandal.
In regard to Iranian transactions, the bank used "a special
process" to clear thousands of Iranian transactions between 2002
and 2006, worth more than $11 billion, through its New York branch
during a period when Iran was subject to economic sanctions. The
process omitted details in payment messages sent to New York that
could have caused the transactions to be flagged for scrutiny.
The improper handling of Iranian transactions by New
York-regulated banks has been a focus of DFS since early in its
formation in 2011.
In 2012, the agency reached a $340 million settlement with the
U.K.'s Standard Chartered PLC for handling more than $250 billion
of restricted transactions for Iranian customers.
And in June 2014, the agency also helped pressure BNP Paribas SA
of France to sign an unprecedented combined $8.9 billion settlement
with U.S. authorities for violations of U.S. economic sanctions
against Sudan, Iran and other countries.
Write to Erica Orden at erica.orden@wsj.com
(END) Dow Jones Newswires
December 15, 2016 17:35 ET (22:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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