Spitzer, Mccaul Reach $5 Million Resolution In Money Laundering Investigation
State Attorney General Spitzer and State Banking Superintendent Elizabeth McCaul today announced a $5 million settlement with Commercial Bank of New York in connection with an ongoing money laundering investigation.
From late 1997 through May of this year, while pursuing narcotics money launderers investigators from the Attorney General's Organized Crime Task Force and investigators from the Crime Proceeds Strike Force - which is comprised of the Attorney General's Office, the State Banking Department and the State Department of Taxation and Finance - tracked drug money to accounts held at Commercial Bank of New York. The accounts were maintained by Commercial Bank's international private banking department, which promised high levels of personal service, discretion and confidentiality to foreign nationals residing mainly in Latin America.
"Fighting financial crime has become a top priority for law enforcement," Spitzer said. "This case shows how close cooperation between state agencies and with the banking industry can produce excellent results in combating one of the most troublesome financial crimes of all: money laundering."
The agreement represents the first instance in which the AG's office has cited a financial institution with violations of state and federal laws designed to detect and prevent money laundering through banks.
Superintendent of Banks Elizabeth McCaul said: "As the prime funding source of the Crime Proceeds Strike Force, the Banking Department is committed to fighting money laundering and today's announcement is another win for law enforcement efforts in New York."
The Attorney General's office determined that CBNY repeatedly failed to document important information about the account owners and their deposits that would have allowed the bank to detect and report money laundering activity. State and federal laws and regulations require banks to know their customers and to document such knowledge with records that establish the customer's identity, sources of funds, net worth and expected or anticipated type and level of account activity.
Commercial Bank of New York has agreed to pay penalties of $ 4.25 million to the Banking Department for the failure to establish and maintain safe and sound practices and adequate policies and procedures reasonably designed to detect money laundering.
CBNY has entered agreements with the Attorney General, the Banking Department, and the FDIC without admitting to the Attorney General's findings or to any violation of law or regulation.
CBNY will pay the sum of $750,000 to the Attorney General to reimburse the State for costs incurred during its 4-year money laundering investigation. The criminal investigation of certain other entities and individuals will continue.
CBNY also consented to separate Cease and Desist Orders issued by the Banking Department and the FDIC, which insured CBNY's deposits, relating to the bank's procedures for detecting and preventing money laundering and reporting suspicious activity to the appropriate state and federal authorities.
CBNY's wholly owned subsidiary, CBNY Investment Services Corp., a securities brokerage firm which now services some of CBNY's international clients, has also agreed to employ an independent consultant to ensure that CBNY Investment Services Corp.'s internal controls and procedures are reasonably designed to detect and prevent the types of violations uncovered by the investigation.
Today, the New York State Banking Board approved a transaction where CBNY would be acquired by a holding company of North Folk Bancorporation.
The case was handled by Assistant Attorney General and Crime Proceeds Strike Force Director Kevin Suttlehan, under the direction of Criminal Prosecutions Bureau Chief Janet Cohn and Criminal Division Chief Peter Pope; Senior Investigators John Flood and Emery Nemeth of the New York State Organized Crime Task Force, under the supervision of Senior Supervising Investigator John O'Connor, OCTF Chief Investigator Mitch Lampert, and Investigations Bureau Chief Investigator William Casey; Investigator Vic Cruz of the State Banking Department, under the supervision of Criminal Investigations Bureau Director Ralph Fatigate and Deputy Superintendent and Counsel Sara Kelsey; and FDIC Senior Regional Attorney Carol Laakso, under the supervision of Regional Counsel Barbara Monheit.