Federal authorities in the U.S. are investigating Royal Bank of Scotlandfor possible breaches of Iran sanctions in a probe that has already led to the departure of a senior risk manager.
The U.K. bank is being probed by the Federal Reserve (explain this) and Department of Justice after volunteering information to them and U.K. regulators about 18 months ago, several people close to the situation said.
The bank uncovered the alleged failings after Chief Executive Stephen Hester initiated an internal review not long after his arrival three years ago.
The case adds to a series of U.K., European and Japanese banks coming under scrutiny by regulators over allegations of illicit dollar transactions with Iran before tighter rules were introduced in the U.S. in 2008.
The revelation comes on the heels of a settlement last week by U.K. rival Standard Chartered , which agreed to pay a $340 million fine to New York State’s Department of Financial Services.
But unlike StanChart, RBS is not under investigation by Benjamin Lawsky, the New York state regulator who snubbed other supervisors by pressing ahead with the recent regulatory order and settlement.
RBS’s ongoing internal review has seen the departure of a risk manager and led to internal criticism over control of the bank’s regional compliance units, one person close to the matter said.
The probe marks the latest blow for RBS following a series of mishaps including an IT failure, widespread mis-selling of retail and small-business products and its involvement in the scandal over the alleged manipulation of Libor interest rates (explain this).
The bank has for several years been under intense scrutiny by US and UK authorities over perceived governance and risk-control deficiencies. Last year, it signed an agreement with US authorities that forced it to improve its compliance with bank secrecy and anti-money laundering laws.
It also agreed to pay $500m in fines as part of a settlement with the DoJ two years ago in which it admitted that ABN Amro, the Dutch lender it bought in 2007, had wilfully and systematically violated US sanctions against Iran, Libya, the Sudan, and Cuba.
RBS declined to comment, but referred to its half-year report this month where it said it “has initiated discussions with U.K. and U.S. authorities to discuss its historical compliance with applicable laws and regulations, including US economic sanctions regulations.”
“The investigation costs, remediation required or liability incurred could have a material adverse effect on the group’s net assets, operating results or cash flows in any particular period,” it added in the report.
On Tuesday, Germany’s Commerzbank said its past transactions involving Iran remained under investigation and it was co-operating with U.S. federal and New York authorities.
Sumitomo Mitsui Financial Group, one of Japan’s largest lenders, told investors last month in a securities filing that a “limited number” of transactions with countries subject to U.S. sanctions had been identified and voluntarily disclosed to U.S. authorities.