ABN Amro has agreed to pay $75 million in fines and its board members to repay EUR1 million in executive bonuses after admitting to serious flaws in compliance controls at its Dubai branch and US dollar clearing centre in New York.
The sanctions follow publication of a report by independent legal counsel which uncovered serious shortcomings in the bank's internal controls and compliance procedures.
The report found that between 1997 and 2004, employees of the bank in Dubai developed procedures that modified US dollar payment instructions sent to the bank's clearing centre in New York on behalf of Libyan and Iranian clients. They excluded country and client-specific information from the relevant payment instructions so that the payments would pass through the New York branches' OFAC filter without being detected and blocked.
The bank has not put a figure on the value of transactions involved, but stresses it has found no evidence so far of any terrorist connection.
Today, the Dutch Central Bank and US regulatory agencies imposed a sanction of a cease and desist order, including an aggregate civil penalty of $75 million (approx. EUR62.5 millionn). In addition, ABN Amro has agreed to make a voluntary endowment of $5 million (approx. EUR4 millionn) to the Illinois Bank Examiners' Education Foundation.
Rijkman Groenink, ABN AMro chairman says: "As a global financial organisation, nothing short of the highest standards of compliance is acceptable. We regrettably recognise that, in the past, our compliance in certain areas did not meet this standard. Further improving our compliance is the highest priority of the bank."
He says board members have decided to pay back collectively EUR1 million out of their bonuses received for the year 2004 by way of restitution for the failures. Rijkman Groenink has returned 40% of his bonus, CFO Tom de Swaan 30%, while the four other members have each returned 20% of their bonuses.
The Dutch bank says its compliance function worldwide has been significantly enhanced and centralised with substantial investments made in new anti-money launcering and IT systems. In addition, 300 new compliance jobs have been created, almost doubling the number of bank employees assigned to the task.
Rijkman Groenink said: "All of the measures taken show how important compliance is for us and how the standards within the financial industry and the bank have changed. I am personally committed to ensuring that we continue to implement a compliance function within the bank that meets the highest standards in this area and will serve as a benchmark for the entire financial industry."