NEW YORK, April 29 New York's financial regulator said on Tuesday that he aims to bring an action this summer against a consulting firm hired by a financial institution to monitor its operations.
Benjamin Lawsky, superintendent of the New York state's Department of Financial Services, said, "I think...you will see results this summer" from a continuing investigation of consultants hired at the behest of regulators.
The probe, which last year netted a settlement with Deloitte LLP's financial advisory unit, is "very active and ongoing," he said.
Speaking at the Reuters Financial Regulation Summit, Lawsky declined to name the consulting firm he expects to act against.
His office last year subpoenaed PricewaterhouseCoopers and Promontory Financial Group as part of the investigation, Reuters previously reported, citing people familiar with the matter.
Spokespeople for both PricewaterhouseCoopers and Promontory declined to comment.
Last year, Lawsky accused Deloitte, which was working as a consultant to the New York branch of British-based Standard Chartered Bank, of omitting key information in a report it made to regulators on the bank's money laundering controls. In August 2012, Standard Chartered agreed to pay New York $340 million for breaking U.S. sanctions against Iran and other countries.
In June, Deloitte reached a settlement, agreeing to pay $10 million and refrain from taking new business with New York-regulated banks for a year.
The probe of consultants by Lawsky, whose department oversees New York banks and New York branches of foreign banks, has focused on conflicts of interest. The consultants are paid by the very banks they are retained to monitor.
The probes of PricewaterhouseCoopers and Promontory are part of an investigation of the independence of consultants retained by banks as part of their agreements with regulators.
The consultants are sometimes known as "shadow regulators." Some policy makers called for regulators to review how outside firms were used to fix problems at banks after consultants reaped $2 billion in fees for conducting botched reviews of home loan foreclosures.
Separately, Lawsky said he expects to offer regulations this summer on virtual currencies, such as bitcoin, and is working with a handful of venture capital-related entities that want to establish exchanges.
Lawsky said his office sped up its move to regulate virtual currencies after the failure of Mt. Gox, a Tokyo-based exchange, which filed for bankruptcy in Japan and the United States after losing an estimated 850,000 in customer bitcoins, worth about $560 million.
In light of Mt. Gox's problems, Lawsky sought applications from companies interested in setting up exchanges in New York. He has suggested such exchanges could offer safeguards for traders.
Lawsky said several firms are interested in setting up exchanges. "That's moving pretty quickly," he said, adding that he hopes to have exchanges approved "when the regulations come out over the summer."
Lawsky said regulators must be sure that money-laundering controls are in place and that consumers know the risks they are taking with virtual currencies.
Follow Reuters Summits on Twitter @Reuters_Summits (Additional reporting by David Henry and Peter Rudegeair in New York; Editing by Leslie Adler)