Sun | Aug 9, 2020

Rabobank to pay fine in money-laundering case

Published:Thursday | February 8, 2018 | 12:00 AM

Dutch lender Rabobank's California unit agreed Wednesday to pay US$369 million to settle allegations that it lied to regulators investigating allegations of laundering money from Mexican drug sales and organised crime through branches in small towns on the Mexico border.

The subsidiary, Rabobank National Association, said it doesn't dispute that it accepted at least US$369 million in illegal proceeds from drug trafficking and other activity from 2009 to 2012. It pleaded guilty to one count of conspiracy to defraud the United States for participating in a cover-up when regulators began asking questions in 2013.

The penalty is one of the largest US settlements involving the laundering of Mexican drug money, though it's still only a fraction of the US$1.9 billion that Britain's HSBC agreed to pay in 2012. It surpasses the US$160 million that Wachovia Bank agreed to pay in 2010.

Settlement terms

Under the agreement, the company will cooperate with investigators. The federal government agreed not to seek additional criminal charges against the company or recommend special oversight.

The settlement describes how three unnamed executives ignored a whistle-blower's warnings and orchestrated the cover-up. Two of the executives were fired in 2015 and one retired that year.

"Settling these matters is important for the bank's mission here in California," said Mark Borrecco, the subsidiary's chief executive.

In 2010, Mexico proposed new limits on cash deposits at the country's banks, resulting in more tainted deposits at Rabobank branches in Calexico and Tecate, according to the plea agreement. Accounts in the two border towns soared more than 20 per cent after Mexico's crackdown, and bank officials knew the money was likely tied to drug trafficking and organised crime.

Risky customers escaped scrutiny, including one in Calexico who funnelled more than US$100 million in suspicious transactions. Customers in Tecate withdrew more than US$1 million in cash a year from 2009 to 2012, often in amounts just under federal reporting requirements.

Heather Lowe, legal counsel and government affairs director at research and advocacy group Global Financial Integrity, said the illegal activity bore similarities to what happened with HSBC and Wachovia.

But those banks were charged with laundering Mexican drug proceeds, while Rabobank only acknowledged covering it up.

"It seems in this case we have the bank taking the hit for lying, but not for the violations themselves," said Lowe, who anticipates the three unnamed executives will be prosecuted.

The government has a co-operating witness in former compliance officer George M. Martin, who agreed in December to cooperate with authorities in a deal that delayed prosecution for two years.

Martin, a vice-president and anti-money laundering investigations manager, acknowledged he oversaw policies and practices that blocked or stymied probes into suspicious transactions, and said he acted at the direction of supervisors, or at least with their knowledge.

Martin told investigators that he and others allowed millions of dollars to pass through the bank.

Rabobank, based in Utrecht, Netherlands, said last month that it set aside about €310 million (US$384 million) to settled allegations against its subsidiary. Sentencing is scheduled for May 18.

- AP