Commerzbank to Settle U.S. Allegations of Sanctions and Money-Laundering Violations -- Update

By Samuel Rubenfeld And Eyk Henning 

German lender Commerzbank AG will pay $1.45 billion to settle allegations of sanctions and money-laundering violations.

The settlement resolves investigations by U.S. and New York state regulators and law enforcement into allegations that the bank had violated laws barring transactions on behalf of Iran and Sudan and abetted a multibillion-dollar securities fraud at Japan-based Olympus Corp.

Under the settlement with New York's financial regulator, Commerzbank also will install an independent monitor and fire several employees, including the head of anti-money-laundering, fraud and sanctions compliance at the New York branch.

"When there was profit to be made, Commerzbank turned a blind eye to its anti-money-laundering compliance responsibilities," said Benjamin Lawsky, superintendent of the New York Department of Financial Services, in a statement Thursday.

Commerzbank, in a statement, said the settlement will dent fourth-quarter earnings by an additional EUR338 million. That will see the bank swing to a loss in last year's final quarter, for which the bank reported a preliminary net profit of EUR77 million ($87 million) in February. That compares with EUR64 million a year earlier and analyst forecasts for EUR36 million.

"We take these violations very seriously and deeply regret the actions that led to today's announcements," Commerzbank Chief Executive Martin Blessing said in Thursday's statement. He added the bank will continue to make changes to its systems, training and personnel to address the deficiencies identified.

"The U.S. dollar business remains a central component of our product suite to companies and financial institutions worldwide. As an international bank, we have a keen interest in maintaining the highest industry standards everywhere we do business," he said.

Commerzbank will pay a total of $1.45 billion in penalties and forfeitures under the settlement. The bank will pay $610 million to the Department of Financial Services, $300 million to the U.S. Attorney's Office for the Southern District of New York, $200 million to the Federal Reserve, $172 million to the Manhattan District Attorney's office and $172 million to the U.S. Department of Justice, according to a statement from the New York regulator.

A $258.6 million fine assessed by the Treasury Department's Office of Foreign Assets Control will be satisfied by the bank's payment to the U.S. Justice Department, Treasury said in a statement.

Write to Eyk Henning at [e-mail]

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Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US68163W1099