Commerzbank AG Pays Fines to Settle Serious Allegations

Posted in Offshore Account Update on July 10, 2015 | Share

When banks are suspected of wrongdoing, it is common for the financial institutions to settle the case with the Department of Justice by paying fines and entering into deferred prosecution agreements.

Commerzbank AG recently became one of the latest banks to settle a criminal case. Between fines and the money the bank agreed to forfeit, the bank ended up paying a total of $1.45 billion to resolve its criminal allegations.

In this case, the bank was charged with violating the International Emergency Economic Powers Act (IEEPA) and the Bank Secrecy Act (BSA). The bank has also entered into a settlement agreement with both the Board of Governors of the Federal Reserve System, as well as the Office of Foreign Assets Control (OFAC), which is a part of the Treasury Department.

From time to time, banks commit financial crimes in connection with accounts and transactions made by clients. When such crimes occur, the financial institutions often provide detailed information about transactions to the authorities when entering into deferred prosecution agreements and settlements, which can provide the evidence the Treasury Department and other agencies can use to move forward with further prosecutions.

Any financial institution charged with a crime, or any individual or business concerned about the information a bank is providing, needs to consult with a Washington DC criminal tax lawyer for assistance with avoiding or responding to the charges.

Commerzbank AG’s Alleged Violations

Commerzbank, a Frankfurt bank, admitted criminal conduct in violation of IEEPA and the BSA. Commerz New York, which is a New York branch of the bank, also admitted that its criminal conduct violated the BSA.

Commerzbank forfeited $563 million and was fined $79 million. A total of $300 million in fines was in connection with BSA violations and the money will be remitted to the victims of a large-scale securities fraud scheme worth billions that Commerzbank facilitated.

The deferred prosecution agreement and fines settle a four-count federal indictment against the banks for offenses that include willfully failing to file suspicious activity reports or to conduct due diligence on foreign correspondence accounts.

The bank must comply with the deferred prosecution agreement, which will last for a period of three years. If the bank complies during the three-year period, the criminal charges will be dismissed.

The bank has also resolved other legal issues for falsifying NY financial records, as well as issues related to the Board of Governors of the Federal Reserve and the New York State Department of Financial Services.

It has also been alleged that one of the crimes the bank committed involved concealing substantial transactions on behalf of Iranian and Sudanese businesses in violation of U.S. sanctions laws, despite the fact that bank managers raised red flags about the transactions.

Commerz also facilitated large-scale accounting fraud by Olympus, a Japanese manufacturer. The bank loaned money to off-balance sheet entities Olympus had created to perpetrate fraud and permitted Olympus to transact more than $1.6 billion through Commerz NY to further the company’s fraud scheme. BSA requires financial institutions to detect and report suspicious activity, but the bank failed in this obligation.

The Assistant Attorney General commented: “Financial institutions must heed this message: banks that operate in the United States must comply with our laws, and banks that ignore the warnings of those charged with compliance will pay a very steep price.”

The case is yet another solid example of a situation where the federal government has imposed strict penalties on a bank for failure to comply with U.S. banking laws.

The government is aggressively pursuing criminal charges against financial institutions, and if you are involved in unlawful transactions you need to contact a criminal tax lawyer in Washington D.C. before your bank is charged. Call attorney Kevin Thorn today to learn more.

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