A Dutch bank wants more time to address longstanding anti-money laundering shortcomings on the basis that efforts to comply with unprecedented Western sanctions against Russia have stretched staff and resources thin.
In an earnings report, Rabobank, the second largest lender in the Netherlands, disclosed Thursday that it had asked De Nederlandsche Bank, or DNB, to extend its original deadline of December 2023 by an unspecified time so that it can fill the remaining gaps in its due-diligence files, work through a backlog of transactional alerts and fix other problems with its local retail division.
“We are continuously investing in and increasing our efforts under our remediation program, which we do in a dynamic context dealing with the fast pace of sanctions on Russia, tight labor market conditions and new regulations,” Rabobank said. “In light of these challenging developments that affect progress we have asked DNB for an extension.”
DNB formally ordered Rabobank to eliminate the deficiencies in December of last year after several warnings and enforcement actions, including a reported €1 million fine in 2018, fell short of prodding the lender into taking sufficient action. The regulator also informed the bank it had commenced fresh enforcement proceedings against it.
Dutch officials have thus far declined to say whether the Dutch Public Prosecution Service has opened a parallel investigation into Rabobank, whose rival, ING, paid a record €775 million AML-related penalty in 2018 following a criminal probe, three years before ABN Amro paid €480 million to address systemic violations.
The investigations into ING and ABN Amro began following discussions between DNB, the Public Prosecution Service and Dutch Fiscal Information and Investigation Service, the Netherlands’ primary law enforcement agency for tackling financial crime. Like those two lenders, Rabobank’s recent compliance failures extend beyond the Netherlands.
In 2018, the bank agreed to pay $368 million to the U.S. Justice Department after federal prosecutors in California charged a local subsidiary with handling hundreds of millions of dollars tied to drug trafficking and other crimes, and obstructing regulators.
Rabobank, which operates as a cooperative, warned members Thursday that the latest enforcement proceedings back home will “more likely than not” end with “an outflow of funds,” but “too many uncertainties” exist at this point to estimate the size of the expected fine.
Rabobank’s net profits fell by more than 25 percent from the first six months of last year to bottom out at €1.6 billion by June because of rising compliance-related expenses and the lender’s withdrawal from Russia, which led to €42 million in losses.
The bank began severing ties with Russia in late February, shortly before DNB warned Dutch financial institutions, corporate services providers and other companies to disclose any accounts they hold or payments they may have handled for Russian parties blacklisted by the West in response to the invasion of Ukraine.
Rabobank’s administrative expenses meanwhile rose 13 percent from the first six months of last year to reach €814 million for the first half of 2022, largely because of “extraordinary KYC [know-your-customer] costs” connected to the mandatory AML overhaul, which the lender considers its “highest priority.”
Rabobank altogether spent more than €250 million on AML compliance in the first six months of 2022 and over the past year increased compliance staffing by more than 30 percent to a new headcount of 6,400 employees, which amounts to 14 percent of the lender’s total global workforce.
The lender also created a new, anti-economic crime position on its board of directors, which Philippe Vollot, currently working as chief administrative officer for troubled Danish lender Danske Bank, has agreed to take up in October, subject to regulatory approval.
Samantha Sheen, former AML director for ACAMS in Europe, told ACAMS moneylaundering.com that Rabobank’s request for more time to address its legacy AML shortcomings while it prioritizes sanctions compliance “reflects a real risk-based approach.”
“The bank is probably right in thinking that if the greatest risk lies in other compliance areas, it’s better not to stretch yourself too thin,” said Sheen, now a London-based AML consultant, said.
A DNB spokesperson declined to comment on Rabobank’s latest earnings report, citing legislation that prohibits regulators from sharing details on specific supervisory cases.
Contact Koos Couvée at email@example.com
|Topics :||Anti-money laundering , Know Your Customer|
|Document Date:||August 11, 2022|