RBS Fined $100M To Settle on Sanctions Related Compliance, Group Finance Director To Resign

The Royal Bank of Scotland (RBS) has come to a settlement with three prominent regulators in the United States, in connection with historical compliance with US economic sanctions, according to a press release on its corporate website today.

The New York State Department of Financial Services (DFS), one of the regulators in the settlement, also put out an official statement on the settlement with RBS, which referenced it in connection with violations of law pertaining to transactions involving Iran, Sudan and other regimes and entities subject to international sanctions. A copy of the statement from DFS, is available on the dfs.ny.gov website.

According to the DFS press release, individuals at RBS who engaged in misconduct were disciplined, including employee dismissals. Those who were terminated include RBS’s Head of Global Banking Services for Asia, Middle East and Africa, and Head of the Money Laundering Money Laundering Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Read this Term Prevention Unit for Corporate Markets, among others. Of the $100 million, $50 million will be paid to the New York State Department of Financial Services (DFS) and $50 million will be paid to federal authorities (noted below).

US Authorities Speak Out

NY Governor, Andrew Cuomo commenting in the DFS statement said,“We have a vital responsibility to combat misconduct at banks and continue strengthening the long-term integrity of the financial system.” Governor Cuomo added to his statement regarding the settlement, “In New York, we will continue our aggressive work rooting out global money laundering that puts our national security at risk.”

The regulators in the announced settlement by RBS included the Board of Governors of the Federal Reserve System (Fed), DFS (as noted above), and the Office of Foreign Assets Control (OFAC), based on an investigation initiated by RBS plc in 2010 into its historical US dollar payment practices and controls in the UK.

In settling with the above mentioned Authorities, RBS agreed and fully provisioned to pay $100 million (£62 million) in total, with $50 million (£31 million) to the Fed, of which $33 million (£20 million) is deemed to satisfy the OFAC penalty, and $50 million (£31 million) to DFS, according to the official announcement on its corporate website.

The RBS press release described this review as having been shared with the relevant US Authorities in 2010, and had been disclosed in regulatory filings subsequently, according to the official press release. The US Department of Justice and the District Attorney of New York have concluded their parallel criminal investigations and are not taking action against RBS plc, according to the description.

Nathan Bostock , Group Finance Director Announces Intention to Resign

In a concurrent press release today, RBS also confirmed that Nathan Bostock has informed the Board of his intention to resign from his role as Group Finance Director. His formal resignation is expected soon, as confirmed in the related press release, but he will remain in his position to oversee an orderly handover of his responsibilities. Details on arrangements for his successor will be announced in due course as per the note in the announcement.

Philip Hampton, RBS's Chairman commented in that corporate press release, with regards to the intended resignation announced by Mr. Bostock, said, “Nathan did a remarkable job as Chief Risk Officer and was integral to the plan which restored safety and soundness to the bank following the 2008 banking crisis. He leaves with the best wishes of the Board.”

RBS Chief Executive, Ross McEwan added in the official press release with regards to the Group Finance Director's plans, "I had the opportunity to work with Nathan through the autumn as we announced the new capital plan for the bank. He is a talented banker who brought a huge amount to our discussions with our regulators and our majority shareholder. While I'll miss working with Nathan, I look forward to competing with him in the UK market as we strive to better the industry for our customers."

Improvements Underway, and So far Addressed

According to the press release concerning the settlement, RBS plc has cooperated fully with the US Authorities and acknowledges and deeply regrets these failings as noted, and added how RBS plc has embarked on an extensive remediation plan to address the shortcomings identified in its investigation. In addition, RBS plc has committed almost £300 million (since 2010) to strengthen the bank's control environment on sanctions, according to the press release, and since 2009, RBS plc has:

• Instituted a new more comprehensive global OFAC compliance policy with clear guidance including a zero-tolerance for breaches of sanctions requirements and the introduction of electronic filtering of Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term, including an enhanced filtering approach for Her Majesty's Treasury and OFAC, which goes beyond that mandated by law.
• Conducted an extensive review of all customer relationships in the relevant countries and exited a number of customer relationships.
• Enhanced its Anti-Money Laundering and Sanctions Compliance function and increased its team by more than 730 employees since June 2011 to a total of 1,700 today.
• Strengthened governance at a number of different levels within Group plc to ensure the appropriate coordination and prioritization of sanctions compliance activity across Group plc.
• Instituted compulsory annual sanctions compliance training for all 120,300 employees globally

Today's announcement follows a class action lawsuit that alleged FX rate manipulation by a number of banks, and filed in early November in a NY court by a South Korean company, as previously reported.