Rabobank Coughs Up $368 Million and Pleads Guilty to Conspiracy to Money Launder and Obstruct Investigation

Michael Volkov
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The Justice Department announced a guilty plea by a subsidiary of Rabobank, a Dutch global bank, to a conspiracy to violate money laundering laws and obstruct a regulatory investigation of Rabobank’s activities in California.  (Copy of Plea Agreement Here).  Rabobank agreed to pay $368 million in forfeited funds.  Rabobank’s settlement follows the deferred prosecution agreement with George Martin, a Rabobank manager in Southern California, who agreed to cooperate with the ongoing criminal investigation.

In a brazen conspiracy committed by Rabobank and top executives of its California operations, Rabobank laundered hundreds of million dollars in untraceable cash from Mexico through its rural bank branches in Imperial County in Southern California.  Rabobank then transferred the money via wire transfers, checks and cash transactions without notifying federal regulators of the suspicious nature of the transactions.

Rabobank executives conspired to obstruct and mislead the Office of Comptroller of the Currency during a 2012 examination by hiding deficiencies in its AML program, and specifically withholding a consultant’s assessment of its AML program.

Rabobank had a long history of deficient AML compliance.  The OCC had imposed deficiency findings and consent orders regarding Rabobank’s AML program.  Notwithstanding Rabobank’s failure to improve its AML program, the OCC eventually closed the enforcement action in 2012.

Rabobank continued to engage in laundering activities.  The factual statement contains numerous examples of efforts that Rabobank took to continue its laundering activities.

Rabobank maintained a Monitoring and Investigations Unit to monitor and manage thousands of monthly high-risk alerts.  A total of three people were assigned to the Unit to review and investigate approximately 2,300 alerts and two people were tasked with conducting more than 100 investigations per month, including approximately 75 customers per month for whom SAR determinations had to be made.

In June 2010, the Mexican government announced money laundering restrictions on cash transactions involving US dollars at Mexican banks.  In reaction to this announcement, Rabobank observed large increases in cash deposits at its Southern California branches.  Rabobank’s branch located two blocks from the Mexican border was the highest performing branch in California.  Rabobank continued to market its services to Mexican nationals with cash-intensive activities.

To avoid investigation of suspicious accounts, Rabobank developed a process to add customers to a Verified List, notwithstanding the presence of numerous red flags and suspicious indications of money laundering.  In one case, a customer at a specific branch engaged in $100 million of cash deposits and related transactions before Rabobank closed the account.  In another case, a customer made withdrawals in increments of $9500, totaling $1 million over a year, before Rabobank closed the account.

In November 2012, the OCC began an examination of Rabobank’s.  The next month, Rabobank hired a consultant to review its AML compliance program.  At the same time, an executive at the company raised serious concerns with the executive management team (several of whom were well aware of the laundering activities and actively promoting the scheme).

The consultant’s report identified numerous deficiencies in Rabobank’s compliance program and recommended numerous actions to enhance its program.  The consultant shared the report with individual members of the executive management team.  The executive who previously told the executive management team about deficiencies in Rabobank’s program provided similar information to the OCC examiners.

In February 2013, the OCC sent a letter to Rabobank concerning its AML program and requested any reports or recommendations from the consultant’s report.  Several executives then conspired among themselves to withhold the bulk of the report except for a summary and then provided false responses to the OCC concerning its AML program.

At the same time, in response to specific warnings about deficiencies in Rabobank’s Southern California bank operations, the executives informed the reporting executive that she would no longer be permitted to report to the executive management team and eventually she was placed on leave and then fired from the bank.

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Michael Volkov
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