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From Banking and Finance Law Daily, November 18, 2014

Bank of Tokyo-Mitsubishi hit with additional $315M penalty for sugarcoating report

By Charles A. Menke, J.D.

The New York Department of Financial Services has imposed an additional $315 million monetary penalty against Bank of Tokyo Mitsubishi UFJ (BTMU) for misleading regulators regarding transactions with Iran, Sudan, Myanmar, and other sanctioned entities, DFS Superintendent Benjamin M. Lawsky has announced. The consent order also includes disciplinary action for individual bank employees.

The DFS’ latest action follows a year-long investigation showing that BTMU employees pressured the bank's consultant, PricewaterhouseCoopers (PwC), into removing key warnings to regulators in an ostensibly objective report the bank submitted to the DFS. The report pertained to the extent of BTMU’s illicit conduct on behalf of those sanctioned countries and entities.

"BTMU employees pressured PwC into watering down a supposedly objective report on the Bank's dealings with Iran and other sanctioned countries, thereby misleading regulators,” Lawsky said. “It is clear that we—as a regulatory community—must work aggressively to reform the cozy relationship between banks and consultants, which far too often has resulted in shoddy work that sweeps wrongdoing under the rug."

Penalty. The $315 million dollar penalty is in addition to the $250 million penalty BTMU agreed to pay under a settlement it reached with the DFS in June 2013, for its conduct surrounding currency transactions with the regimes of Iran, Sudan, and Myanmar (Banking and Finance Law Daily, June 21, 2013). As a result, the total monetary penalty that BTMU will have paid under the DFS enforcement actions totals $565 million.

BTMU employee discipline. At the DFS’ direction, BTMU will take disciplinary action against individual BTMU compliance personnel involved in the watering down of the PwC report. Two former compliance employees—Akira Kamiya (Deputy President, Mitsubishi UFJ Securities Holdings) and Tetsuji Kamisawa (Executive Deputy President, Defined Contribution Plan Consulting of Japan)—will be banned from conducting business involving any financial institutions regulated by the DFS, including BTMU's New York branch. Moreover, Tetsuro Anan, a manager in BTMU’s Anti-money Laundering Compliance Office, has resigned following DFS demands calling for his termination.

PwC settlement. For its role in the report’s improper alteration, PwC previously agreed to a series of measures imposed by the DFS (Banking and Finance Law Daily, Aug. 18, 2014). In its settlement, PwC agreed to voluntarily abstain from accepting consulting engagements at financial institutions regulated by DFS; pay a $25 million penalty to the state of New York; and establish and implement procedures and safeguards for engagements that meet the standards established by DFS. Also, PwC withheld over 20 percent of the director’s compensation after the director’s misconduct during the engagement came to light during DFS’s investigation.

Companies: Bank of Tokyo Mitsubishi UFJ, Ltd.; PricewaterhouseCoopers Regulatory Advisory Services

MainStory: TopStory BankSecrecyAct BankingOperations EnforcementActions NewYorkNews StateBankingLaws

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