June 20, 2013 / 2:26 PM / 5 years ago

UPDATE 4-Bank of Tokyo-Mitsubishi to pay N.Y. $250 mln for wire violations

By Karen Freifeld

NEW YORK, June 20 (Reuters) - The Bank of Tokyo-Mitsubishi UFJ has agreed to pay New York state $250 million for deleting information from $100 billion in wire transfers that authorities could have used to police transactions with sanctioned countries like Iran.

The settlement, announced on Thursday, is the latest example of New York state’s chief financial regulator, Benjamin Lawsky, flexing the agency’s muscle. Lawsky extracted a much bigger sum than the U.S. Treasury Department, which settled with the bank over sanctions violations in December 2012 for $8.57 million.

Lawsky has gone his own way before, drawing criticism from other regulators. Last year, when a group of government authorities were investigating Standard Chartered Plc, the New York regulator threatened to revoke the bank’s state license, and stopped working with other agencies.

In August, Standard Chartered agreed to pay the state $340 million over transactions linked to Iran and other countries. Four months later, the bank settled with other agencies for $327 million.

At issue with Bank of Tokyo-Mitsubishi UFJ were 28,000 transactions the bank processed through New York between 2002 and 2007, according to a statement from New York Governor Andrew Cuomo.

For most of the transactions, Bank of Tokyo-Mitsubishi was not breaking sanctions rules. It was entering transactions known as “u-turns” that were legal from 1995 through 2008. In those transactions, an Iranian company or individual could send or receive dollar payments, but only if it used a nonsanctioned bank as its agent. Those payments would come from overseas, be processed in the United States, and then go back abroad.

Lawsky objected to the way Bank of Tokyo-Mitsubishi UFJ handled records for the transactions. Wire transfer systems flag transactions linked to sanctioned countries for further review. Bank of Tokyo-Mitsubishi UFJ stripped information from transfers, the statement said, to speed their processing. That stripping violated New York banking laws for record-keeping.

The bank’s written materials instructed employees on how to delete or omit wire transfer information, according to the statement.

The bank, owned by Mitsubishi UFJ Financial Group Inc , said in a statement it reported the stripping on its own to authorities in 2007, and promptly stopped deleting or omitting information. It also said it has cooperated with regulators.

In December, Bank of Tokyo-Mitsubishi UFJ settled with the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), which oversees sanctions violations. The bank agreed to pay $8.57 million for processing about 100 fund transfers in 2006 and 2007 that allegedly broke federal sanctions laws.

A Treasury spokesman said the department focused only on transactions that were apparent violations of federal sanctions laws.

The Federal Reserve, which regulates Bank of Tokyo-Mitsubishi UFJ, supported OFAC’s $8.5 million penalty last year and worked with the bank and other regulators to be sure the compliance program was fixed, a Fed spokesman said.

Other banks have settled with authorities for violating laws related to sanctions. After settling with New York in August, Standard Chartered agreed to pay $327 million in a separate deal with other U.S. agencies to resolve similar accusations in December.

HSBC Holdings Plc agreed to pay $1.9 billion in a deferred prosecution agreement with the U.S. Justice Department in December over sanctions violations.

In the New York settlement, Bank of Tokyo-Mitsubishi UFJ agreed to hire an independent consultant for a year to evaluate risk controls relating to compliance in the New York branch and report to the state.

The New York Department of Financial Services has also been scrutinizing independent consultants. On Tuesday, the agency said that Deloitte LLP’s financial advisory unit will pay $10 million and refrain from new business with certain New York banks for a year.

The deal resolved accusations that Deloitte Financial Advisory Services omitted key information in a report to regulators after reviewing Standard Chartered’s operations. The state said it found no evidence that Deloitte intentionally helped or conspired with the bank to launder money.

Deloitte also agreed to reforms designed to end potential conflicts of interest. Lawsky said the independent consultant for Bank of Tokyo will have to agree to abide by those reforms.

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