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 The penalty, previously reported to be more than $500 million,
includes a demand from New York's top banking regulator, Benjamin
Lawsky, for more than $300 million from the bank, the sources said.
Other U.S. authorities, including the Department of Justice, the
Treasury Department, the Federal Reserve and the Manhattan District
Attorney, are also involved in the talks.
Among the violations being investigated are Commerzbank's
transactions for the Islamic Republic of Iran Shipping Lines, one of
the sources said.
The state-sponsored shipping company was designated for economic
sanctions by the United States in 2008 for allegedly supporting
Iran's proliferation of weapons of mass destruction. The source said
Commerzbank was alleged to have done business with the company
despite knowing that it was sanctioned.
A Commerzbank representative declined to comment on the allegations
and the size of any settlement.
A settlement could be reached in the next few weeks, one source
said.
The Justice Department, Manhattan DA's office and the New York
Department of Financial Services declined to comment. The other
authorities could not immediately be reached for comment.
The German bank is the latest bank to enter into settlement
negotiations with U.S. authorities. French lender BNP Paribas SA
struck a record-breaking $8.9 billion deal last week to resolve
investigations into violations of sanctions and related misconduct
involving Sudan, Iran and Cuba.
U.S. authorities are also investigating Italy's UniCredit SpA,
France's Credit Agricole SA and Societe Generale, and Germany's
Deutsche Bank AG for sanctions violations, sources said.
SIMILARITIES TO STANDARD CHARTERED
Over the past five years, more than half a dozen foreign banks have
settled with authorities over sanctions violations. They forfeited
more than $12 billion, according to Manhattan District Attorney
Cyrus Vance.
For example, Standard Chartered Plc, which was accused of hiding
59,000 Iranian transactions worth $250 billion from regulators, paid
$667 million to U.S. authorities in 2012.
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One source said the number, volume and type of suspicious
transactions at Commerzbank are in the same ballpark as those in the
Standard Chartered case.
Like Standard Chartered, many of Commerzbank’s transactions involved
Iran, according to one source. Violations involving Iranian entities
can lead to lower penalties than sanctions against other countries
such as Sudan. That is because until 2008, U.S. law allowed Iranian
transactions that originated and ended outside the United States,
even if they were cleared through a U.S. bank.
The U.S. inquiry into Commerzbank's activities began in 2010. U.S.
authorities have found that the bank stripped identifying
information from incoming wires to avoid red flags that would have
helped regulators police the transactions.
Commerzbank, which is 17 percent owned by the German government, is
expected to enter into a deferred prosecution agreement that would
suspend criminal charges in exchange for the financial penalty and
other concessions, the sources said.
Though other penalties against Commerzbank have not yet been
determined, one source said they were not expected to be severe and
might include installing an independent monitor at the bank.
Commerzbank had 934 million euros ($1.27 billion) at the end of 2013
as provision for litigation risks, including the U.S. investigation.
(Additional reporting by Aruna Viswanatha)
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