Commerzbank avoids conviction in US$1.45b deal

5 Apr9:31 AM

[CHICAGO] Commerzbank AG and US government lawyers gained federal court approval of a US$1.45 billion agreement to defer prosecuting the lender for violating US laws, including sanctions on doing business with Iran and Sudan.

Under the accord, Germany's second-largest lender will pay penalties to government agencies including the Manhattan District Attorney's office, the Federal Reserve and the Treasury Department. The Frankfurt-based bank conceded the allegations, which included aiding accounting fraud at Olympus Corp.

The bank and its New York unit must continue reforms of its anti-money laundering compliance programme and cooperate with the government for three years before charges against it are dropped.

Signed by bank officials and lawyers for both sides last month, the agreement was accepted Friday by US District Judge Beryl Howell in Washington.

"Commerz New York violated the Bank Secrecy Act designed to prevent the movement of money, often with nefarious intent," Diego Rodriguez, the FBI's assistant director in charge in New York, said in a statement when the deal was announced on March 12.

Duncan King, a bank spokesman, declined to comment on Friday on the court's approval of the pact.

"We take these violations very seriously and deeply regret the actions that led to today's announcements," Commerzbank Chief Executive Officer Martin Blessing said in a March 12 statement.

The accord didn't require the lender to plead guilty. If prosecutors agree after three years that it has met its obligations, they must ask the court to dismiss the charges no later than May 3, 2018, according to court records.

The US can resume prosecution if Commerzbank violates the agreement's terms before then.

New York's Department of Financial Services, a party to the deal, previously ordered Commerzbank to hire an independent monitor and fire four employees, according to a March 12 statement by Superintendent Benjamin Lawsky. A compliance chief in the bank's New York branch resigned as a result of the state regulator's probe.

From at least 2002 to 2008, the bank used a series of measures, including stripping out information identifying sanctioned clients, to process transactions valued at more than US$250 billion on behalf of Iranian and Sudanese entities, according to authorities.

The bank is expanding lending to German consumers and companies while winding down soured shipping and real estate loans. Blessing has also pledged to cut at least 5,200 staff as he seeks to reach profitability targets set for 2016. The company posted profit of 264 million euros (S$388 millon) in 2014, up from 81 million euros a year earlier.

Weak economic growth and low interest rates in Europe are making it more difficult to reach the bank's targets, Blessing has said.

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