Two other major French banks, Credit Agricole and Societe Generale,
Germany's Deutsche Bank AG, and Citigroup Inc's Banamex unit in
Mexico are among those being investigated for possible money
laundering or sanctions violations, according to people familiar
with the matter and public disclosures.
The Justice Department and other U.S. authorities, including the
Manhattan District Attorney, are probing Credit Agricole and Societe
Generale for potentially violating U.S. economic sanctions imposed
against Iran, Cuba and Sudan, one of the sources said.
Credit Agricole and SocGen have disclosed that they are reviewing
whether they violated U.S. sanctions. SocGen said in its latest
annual report that it is engaged in discussions with the Treasury
Departmentís Office of Foreign Assets Control over potential
sanctions violations. The two banks could not be immediately reached
Another source said the Justice Department's bank integrity unit is
deep into a probe of whether Citigroup's Banamex operation failed to
police money transfers across the U.S.-Mexico border. Citigroup has
said it is cooperating with the inquiry, which also involves the
Federal Deposit Insurance Corp. Citigroup spokeswoman Molly Meiners
Separately, Citigroup is investigating an alleged fraud involving
$565 million in loans at Banamex and as a result of that has fired a
Prosecutors have also investigated potential sanctions breaches at
Deutsche Bank, according to people familiar with the probe, though
it is unclear how far that has progressed. The bank said in its last
annual report that it had received requests for information from
regulatory agencies and is cooperating with them. It didn't
immediately respond to a request for comment.
The timing of any possible legal action or related settlement
negotiations is unclear.
The pipeline of cases has built up as U.S. prosecutors have pivoted
from focusing on specific criminals to also vigorously pursuing the
financial institutions that move money for them.
At the heart of this effort is a 12-prosecutor Money Laundering and
Bank Integrity Unit within the Justice Department that was created
in 2010. It handled the investigation into BNP for U.S. sanction law
violations, primarily involving Sudan deals, as well as large money
laundering and sanctions cases in recent years against HSBC Holdings
Plc, ING Bank N.V. and others.
Leslie Caldwell, who leads the criminal division at Justice
Department, said in an interview that the unit has its sights set on
a range of firms potentially involved in illicit money flows.
"I think that we'll probably see other financial institutions,
regional banks, maybe some smaller banks, and I think we're also
going to be seeing, as we have already started to see, more online
activity," Caldwell said during an interview on Friday, speaking of
cases in the pipeline.
She declined to name specific firms or confirm any particular
BANK SECRECY ACT
Historically, prosecutors have used money laundering laws to go
after low-level money mules, said Caldwell, in reference to lower
level employees and others who weren't playing critical roles in
instigating or allowing the money laundering.
The Justice Department about five years ago decided to switch
tactics and to more aggressively exploit the Bank Secrecy Act, which
dates back to the 1970s, and was expanded to include criminal
penalties in the wake of the September 11, 2001 attacks.
The law, which requires financial institutions to have robust
anti-money laundering programs, was little used for criminal
prosecutions until the Money Laundering and Bank Integrity Unit -
known internally as "mlbiu" - was created in 2010 to focus on
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"This is a way to attack that problem in a much bigger and more
effective way," said Caldwell, a prosecutor for 17 years who was
confirmed to her current post in May. "The old-school way of
attacking money laundering ... really didn't get at the problem,
which was that many banks did not have adequate controls in place to
prevent those transactions from happening."
The shift has put the financial industry on watch, after prosecutors
failed to land high-profile criminal cases stemming from the
financial crisis and turned their attention to other types of
criminal activity within the financial industry. Banks have
responded by hiring thousands of new compliance experts and spending
millions of dollars to improve their programs.
"I would put the investigation of financial institutions for
laundering proceeds of official corruption pretty high on the list
of risks," said Michael Dawson, who coordinates the global
compliance practice at the consulting firm Promontory Financial
Group. "After you look at the sanctions cases, official corruption
looms large as a risk on the horizon."
MOVING DOWN THE FOOD CHAIN
As the unit finishes a series of money-laundering and sanctions
cases against some of the world's largest banks, prosecutors fear
that criminals have shifted to using mid-level financial
institutions and other types of companies who may not have the
controls that large institutions now have.
Sources said the unit is increasingly investigating actors across
the two dozen types of companies covered by the Bank Secrecy Act.
Among the sectors covered by the act are broker-dealers, jewelry and
auto dealers, casinos, insurance companies, and shipping companies.
The Justice Department has already gone after a handful of such
institutions, including check cashers in Brooklyn, Philadelphia and
Los Angeles who assisted healthcare fraudsters by failing to report
$50 million in transactions, and money transfer company MoneyGram
whose agents were allegedly involved in $100 million in fraud
schemes targeting the elderly. MoneyGram agreed to forfeit $100
million and enter a deferred prosecution agreement over the conduct
in November 2012. It said at that time that it takes compliance
seriously and had created a new anti-fraud program.
Virtual currencies have also emerged as a major focus, in the wake
of the unit's 2013 indictment of digital currency exchange Liberty
Reserve, its founders and other employees who allegedly helped
criminals launder more than $6 billion in proceeds.
Attorneys from the Justice Department's asset forfeiture and money
laundering section, which oversees the mlbiu unit, have also worked
closely with a new FBI unit to help trace the assets of corrupt
foreign leaders, traveling to Ukraine to help recover assets
allegedly stolen by former president Viktor Yanukovich's government.
Those efforts could also unearth information about which banks may
have looked the other way to move proceeds of corruption, or may not
have had required procedures in place, sources said.
(Reporting by Aruna Viswanatha; Editing by Karey Van Hall and Martin
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