Union Bank Settles Up

Having already conceded that it was less than vigorous in complying with federal money-laundering laws, Union Bank of California has agreed to pay $31.6 million in fines and penalties, and to tighten up its review of customers in the money-changing business.

For most of 2004 and 2005, the San Francisco-based bank, which is owned by the Mitsubishi UFJ Financial Group of Japan, failed to adequately monitor accounts owned by private casa de cambio businesses, according to court records.

During one 10-month period, for example, it didn't report millions of dollars in bulk cash deposits of dollars and euros. Investigators linked those cash transfers to the sale of Colombian cocaine that had moved through Mexico on its way to the U.S. and Europe.

"The bank's failure to monitor the [casa de cambio] activity resulted in the movement of millions of dollars of suspected proceeds of drug sales through certain [casa de cambio] accounts at the bank without detection or reporting of the suspicious transactions," according to a consent order filed in federal court.

Union Bank neither admitted nor denied the allegations, but did acknowledge "the seriousness of this matter." The bank said the problem was centered in its international banking business, which it sold in October 2005. Bank officials added that they have redoubled their compliance efforts.

"We will continue to work with our regulators to ensure that our focus on compliance is effective, sustainable and responsive so that failures of this kind are not repeated in the future," said president and chief executive Masaaki Tanaka.

Of the fines and penalties, $21.6 million will be paid into the U.S. Treasury to settle a criminal case filed by the Department of Justice. Another $10 million will be paid to the Treasury to settle separate civil lawsuits filed by the Financial Crimes Enforcement Network, a Treasury agency that combats money laundering, and the Office of the Comptroller of the Currency, which regulates banks.

"Our American economy depends on the integrity of financial institutions and the work of those institutions to ensure compliance with anti-money laundering regulations," said Eileen Mayer, chief of the Internal Revenue Service criminal investigation branch.

Drug Enforcement Administrator Karen P. Tandy added: "When banks fail to uphold their responsibilities, they turn their legitimate business into a currency stash house used by international drug traffickers to line their pockets, fuel more trafficking, and corrupt government officials and global economies. The Union Bank of California will pay the price for its failure with a hefty fee."

by Mark Stein