Friday, May 18, 2018

Bank Sentenced for Obstructing Regulators, Forfeits $368 Million for Concealing Anti-Money Laundering Failures

  Rabobank, National Association, a California subsidiary of the Netherlands-based Coöperatieve Rabobank U.A., was sentenced today before U.S. District Judge Jeffrey T. Miller for conspiring to impair, impede, and obstruct its primary regulator, the Department of the Treasury’s Office of the Comptroller of the Currency (OCC), by concealing deficiencies in its anti-money laundering program.

Judge Miller sentenced Rabobank to pay the statutory maximum fine of $500,000 after taking account of Rabobank’s forfeiture of $368,701,259 as well as a two-year term of probation.  Today’s half million dollar criminal fine coupled with Rabobank’s forfeiture of $368,701,259 stands as the largest monetary penalty paid by a criminal defendant in the history of the Southern District of California.  
In imposing sentence, Judge Miller noted that Rabobank’s conduct essentially amounted to “stiff-arming the OCC, and completely failing in its responsibility to its customers and the nation.”
“The U.S. Attorney’s Office is intent on securing the border and preventing the laundering of narco-dollars through financial institutions like Rabobank,” said U.S. Attorney Adam L. Braverman.  “In doing so we will safeguard our communities and protect our citizens from drug traffickers and corporate criminals alike.”
“Rabobank’s branches on the Mexican border processed hundreds of millions of dollars in suspicious transactions likely tied to international narcotics trafficking, organized crime, and money laundering,” said Acting Assistant Attorney General John P. Cronan. “Instead of filing reports that would have alerted law enforcement to the suspicious activity, as required by law, the bank looked the other way and then compounded its misconduct by conspiring to cover-up its failures and deceiving its regulator.  Today’s sentence and the related forfeiture demonstrate that the Department of Justice will use all the tools at our disposal to combat drug trafficking and transnational crime—including prosecuting financial institutions that turn a blind eye to illicit proceeds moving through their customers’ accounts.” 
“It is the responsibility of Homeland Security Investigations (“HSI”) to monitor and investigate activity which exploits the global infrastructure, to include financial systems.  This complex investigation revealed, and Rabobank admits, that Rabobank was aware of the extreme risk that it was processing hundreds of millions of dollars related to transnational crime and international money laundering – activity which plagues the Southwest Border,” said Dave Shaw, Special Agent in Charge for HSI in San Diego.  “This plea and significant forfeiture sends a strong message to financial institutions that this activity will not be tolerated.”
“Rabobank’s sentencing today is a victory for all Americans and sends a strong message about the need for transparency in banking and ultimately contributes to the fight against money laundering,” stated IRS Criminal Investigation’s Special Agent in Charge, Los Angeles Field Office, R. Damon Rowe. “IRS-Criminal Investigation works diligently with our law enforcement partners to ensure funds obtained through illegal means do not find their way into our financial institutions."
Today’s sentence follows Rabobank’s February 7, 2018, guilty plea for conspiring with several former executives to defraud the United States by unlawfully impairing and impeding the OCC’s ability to regulate the bank and  obstructing its examination of Rabobank’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program.  In connection with that guilty plea, Rabobank admitted that between 2009 and 2012 it implemented BSA/AML policies and procedures that precluded and suppressed legally-mandated investigations into potentially suspicious account activity, much of which was conducted by cross-border customers and through accounts that Rabobank had previously designated “High-Risk.” 
As a result of its BSA/AML failures, Rabobank admitted that certain customer accounts were involved in not less than $368,701,259 in suspicious transactions that were either unreported or untimely reported to the Financial Crimes Enforcement Network (FinCEN), as required by the BSA.  These transactions along the southwest border included high-volume cash deposits and withdrawals, check transactions, electronic transfers, and wire transfers that were consistent with illegal activity such as trade-based money laundering, bulk cash smuggling, structuring, and the black market peso exchange. 
Rabobank’s branches in Imperial County were heavily dependent on cash sourced from Mexico – cash the bank knew was likely tied to narcotics trafficking and organized crime.  In particular, Rabobank’s Calexico, California branch, located approximately two blocks from the U.S.-Mexico border, was the highest performing branch in the Imperial Valley region due to its receipt of cash from Mexico.  Rabobank continued soliciting cash-intensive customers from Mexico, while failing to employ appropriate BSA/AML policies and procedures to address the heightened risk, until approximately May 2013, when Rabobank placed a moratorium on originating new account relationships for Mexico-based businesses entities.
Rabobank also admitted that the bank and its executives corruptly obstructed the OCC’s 2012 examination by responding to the OCC’s February 2013 initial report of examination with false and misleading information about the state of Rabobank’s BSA/AML program and by making false and misleading statements to the OCC regarding the existence of reports developed by a third-party consultant that described the deficiencies and resulting ineffectiveness of Rabobank’s BSA/AML program.  Rabobank also demoted or terminated two of its employees who provided information to the OCC. 
The case is being prosecuted by Assistant U.S. Attorneys Daniel C. Silva, Mark W. Pletcher, and David J. Rawls from the Southern District of California, and Trial Attorneys Kevin G. Mosley and Maria Vento of the Criminal Division’s Money Laundering and Asset Recovery Section.  The investigation team included HSI, IRS, and the Financial Investigations and Border Crimes Task Force (the “FIBC”), a multiagency Task Force based in San Diego and Imperial Counties, and funded by the Treasury Executive Office of Asset Forfeiture (“TEOAF”).  The investigation occurred in parallel with regulatory investigations by the OCC, Office of General Counsel, and FinCEN, Enforcement Division
Roseville, California
Conspiracy to Defraud the United States and (2) To Corruptly Obstruct an Examination of a Financial Institution – Title 18, United States Code, Section 371
Maximum penalties: $500,000 fine; a mandatory special assessment of $400; and a term of probation of at least one year, but not more than five years.
Homeland Security Investigations
Internal Revenue Service – Criminal Investigation
TEOAF’s Financial Investigations and Border Crimes Task Force

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