Commerzbank to pay $1.45 billion to settle banking violations

Commerzbank agreed to pay $1.45 billion to settle multiple US investigations, closing the door on half a decade of legal woes over claims of sanctions violations and its role in one of Japan's biggest accounting scandals.

The bank entered into a deferred-prosecution agreement with the US Justice Department and agreed to pay penalties to government agencies including the Manhattan District Attorney's office, the Federal Reserve and the Treasury Department, according to a Justice Department statement.

New York’s Department of Financial Services also ordered the bank to terminate four executives, according to a statement by Superintendent Benjamin Lawsky.

The head of compliance in the New York branch at the time resigned earlier.

Violations occurred from at least 2002 to 2008, and involved processing transactions valued at more than $253 billion on behalf of Iranian and Sudanese entities, according to Lawsky. The bank’s New York compliance controls were ineffective, according to the statement.

The first probe concerned whether the bank violated US sanctions laws by doing business with countries blacklisted by the Treasury Department.

In the second case, the lender was scrutinized for failing to report suspicious activities at Olympus Corp., whose $1.7 billion-accounting scandal shook Japan in 2011. With the settlement, Commerzbank puts a cap on mounting legal costs as it restructures to reach 2016 profit targets.

The bank said in February that it still plans to boost its Common Equity Tier 1 ratio under the full application of the latest Basel rules to more than 10 per cent and cut costs to about 60 per cent of revenue in 2016.

Bloomberg