UPDATE 3-Rabobank agrees to pay $368 mln over processing illicit funds

(Adds Rabobank comment)

WASHINGTON, Feb 7 (Reuters) - Rabobank N.A., a California subsidiary of the Dutch cooperative, on Wednesday agreed to forfeit over $368 million and pleaded guilty in U.S. federal court for processing funds likely tied to drug trafficking and other illicit activity and then conspiring to obstruct a regulators' examination of its operations.

The bank allowed hundreds of millions in untraceable cash from Mexico and elsewhere to be deposited into branches in California and transferred without adequate monitoring and reporting of the suspicious transactions to federal regulators, the U.S. Department of Justice said in a statement.

Separately, the U.S. Office of the Comptroller of the Currency (OCC), the bank's primary regulator, announced that it had imposed a $50 million civil penalty for deficiencies in its Bank Secrecy Act and anti-money laundering compliance program, but said the amount would be credited toward the bank's Justice Department fine. The regulator also terminated a 2013 cease-and-desist order against the bank.

Rabobank said in a statement that the agreements ended investigations related to its deficiencies and conduct by former employees before 2014.

Settling these matters is important for the banks mission here in California, Mark Borrecco, chief executive officer of Rabobank N.A., said in the statement. He also said the bank had enhanced internal controls and risk management.

Rabobank chose to "look the other way" when it learned of transactions indicative of international drug trafficking, organized crime and money laundering, Acting Assistant U.S. Attorney General John Cronan said in the Justice Department statement.

Three bank executives then tried to obstruct a 2012 OCC examination to avoid sanctions imposed for similar failures in 2006 and 2008, the statement said, and the bank provided false and misleading information in response to a 2013 report by the regulator.

Rabobank's guilty plea took place in U.S. District Court in San Diego. It pleaded guilty to a conspiracy charge for impeding the OCC and obstructing its examination.

A former Rabobank vice president in December entered into a deferred prosecution agreement in the same court. The former vice president, George Martin, admitted to his role in the bank's failure to maintain a proper anti-money laundering program.

In January, the bank said it had taken a 310 million euro ($373 million) provision in the fourth quarter of 2017 ahead of an expected settlement with the U.S. government. (Reporting by Karen Freifeld, editing by G Crosse, Marguerita Choy and Jonathan Oatis)