Commerzbank US settlement set to top $1bn
Commerzbank is in talks to pay US authorities more than $1bn in fines to resolve allegations that the German bank broke anti-money laundering and sanctions laws — at least $400m more than previously thought.
The settlement is in the final stages of negotiations, people familiar with the matter said, and could be announced by the end of the year.
Commerzbank had been in talks to pay more than $600m in penalties to state and federal authorities over the investigation into its dealings with Iran and other countries on the prohibited list, but a parallel money laundering probe by the US attorney’s office in Manhattan could nearly double that sum.
As part of the deal, the German bank is expected to agree to a deferred prosecution agreement, in which criminal charges are dropped after a set period of time if the bank does not break the rules again.
The resolution, if reached, would be the latest in a string of non-US banks taken to task for violating US sanctions laws. BNP Paribas pleaded guilty and paid a record $8.9bn penalty to US authorities this year.
The US Department of Justice, New York’s Department of Financial Services and the New York county district attorney are investigating Commerzbank for business dealings with Iran, Sudan and other countries on the US sanctions list.
The US attorney’s office in Manhattan has been looking into poor risk controls over the bank’s anti-money laundering compliance programme, these people said.
Commerzbank and officials for the government agencies declined to comment.
Commerzbank has disclosed the investigation into whether the bank breached US embargoes, “particularly with respect to Iran, Sudan, North Korea, Myanmar and Cuba”. It warned it “cannot rule out” paying a “considerable sum of money in order to settle the case”.
While the bank is expected to resolve both investigations in the deal now being negotiated, people familiar with the probe cautioned that the terms of the settlement had not been finalised and details could still change.
DFS had been seeking clawbacks of pay or disciplinary actions against bank employees with links to the alleged misconduct. It is not clear whether any related actions will take place as part of the settlement.
Commerzbank, which is 17 per cent owned by the German government following a bailout during the financial crisis, reported better than expected third-quarter earnings last month.
It is not clear what role if any BaFin, the German finance regulator, is playing in the negotiations. Representatives for BaFin could not immediately be reached for comment.
The increased scrutiny of foreign banks by US authorities has created tension with some European countries. One French official called the US’s case against BNP “economic warfare”.
Other foreign banks, including Deutsche Bank, Société Générale and Crédit Agricole, remain under investigation by US authorities for possibly violating US sanctions laws.
The push for a deferred prosecution agreement, or DPA, represents a return to more familiar legal territory for banks. Recent criminal investigations, including the one into BNP, have required the more severe sanction that banks or their relevant subsidiaries plead guilty, following criticism that US authorities believed banks were “too big to jail”.