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Rabobank To Pay $369 Million In Money-Laundering Case

A Rabobank bank location is seen in Thousand Oaks, Calif., Tuesday, Feb. 6, 2018.
Associated Press
A Rabobank bank location is seen in Thousand Oaks, Calif., Tuesday, Feb. 6, 2018.
Rabobank To Pay $369 Million In Money-Laundering Case
Rabobank To Pay $369 Million In Money-Laundering Case GUEST: Elliot Spagat, reporter, Associated Press

>> Our top story on midday addition, it is one of the largest settlements in the United States over laundering Mexican drug money. The California branch of the Dutch lender, rebel bank pleaded guilty to a felony yesterday. They admitted they allowed $369 million in drug money in its branches in Calexico and the Cathay. Joining me is Elliott's baguette, a reporter has been who has been covering the story. >> The bank is not denying it laundered money from drug trafficking. That is not what they pleaded guilty to. Why don't you tell us about that. >> They pleaded guilty to a cover-up in 2013. These proceeds, at least $369 million went through the bank between 2009 and 2012. In 2013 the Treasury Department was doing an annual review and started asking questions. At least three unnamed executives identified in the court documents is as executives participated in the cover-up. The bank pleaded guilty to that. >> Do we know who was depositing all this money? >> Organized crime, drug trafficking, what they were doing is pretty simple. They turned a blind eye through the branches. One example is that they had a list of special customers who were free of that despite suspicious activity. One customer funneled $100 million through the bank. He was on a leave him alone was. It was a massive amount going through these branches with no effort to contact authorities. >> Some issues that seem to be going on here is, first of all, they had very few people who could have oversight of what was going on. Apparently they were receiving alert that may have been ignored. >> There was the mention of an overwhelmed staff. I think it was three compliance officers who had responsibility for overseeing 2300 alerts per month. This was their internal flagging system to flag suspicious activity. >> This is not the first time the bank of gotten in trouble with regulators over this very same issue. Tells about that. >> Right. In 2006 to 2008, they got into trouble and reach a settlement. Interestingly, executive a was working for the Treasury Department at the time. He jumped over to this bank and the same practices continued. >> Yesterday, they entered their plea. What did the bank have to say about this, if anything? >> They said we are happy to put this behind us and we have improved our internal controls. They are scot-free right now as long as they abide by terms of the plea agreement. Significantly, that requires them to cooperate in the investigation. There may be more to come. It will be against individual executives. >> This is a felony. Is anybody going to jail? >> Not yet. One person turned. He was a key person in the case overseeing the anti-money laundering efforts. He has agreed to cooperate with officials. He did not plead guilty. He got deferred prosecution it will be put off for two years. The bank will cooperate. We will see. I think these executives will probably have to be answering some questions. >> Is there a reason why there was an influx in activity in 2010? >> Anti-money laundering measures were introduced. That put strict limits on how much cash could be deposited in Mexican banks. There was a flood of deposits. The number of accounts increased by more than 20% after this. The bank knew it was likely to be drug money. >> This was a very big settlement. Put it in context. Was this the biggest we have ever seen quick >> The biggest is HSBC, a British bank which settled for $1.9 billion in 2012. The other one is Wachovia in 2010 settled for $160 million. This is one of the biggest. >> So this branch, it seems like they have been bad actors for a well. Do we have any indication that will stop or that they will be watched over a little bit more carefully quick >> The future is hard to predict. They have been under special supervision since 2013. A press release yesterday said that oversight had been lifted. The federal government in a plea agreement, did praise them for improvements since all this happen. We will see. >> Elliott is a reported with -- reporter with the associated press. Thank you very much. >> Thank you.

Dutch lender Rabobank's California subsidiary agreed Wednesday to forfeit $369 million after a long-running investigation concluded it was used to launder millions of dollars in Mexican drug money.

Rabobank National Association also pleaded guilty to one count of conspiracy to defraud the United States.

U.S. Magistrate Judge Jill Burkhardt did not provide details during a brief hearing, but Rabobank said last month that the subsidiary would likely acknowledge that employees hid information from regulators nearly five years ago.


It marks one of the largest U.S. settlements involving the laundering of Mexican drug money, though it's still only a fraction of the $1.9 billion that Britain's HSBC agreed to pay in 2012.

The Rabobank settlement surpasses the $160 million that Wachovia Bank agreed to pay in 2010.

Rabobank attorney James Cavoli declined to speak with reporters outside the courtroom. Company representatives have not responded a phone message and emails seeking comment.

Last month, former bank subsidiary compliance officer George M. Martin agreed to cooperate with authorities in a deal that delays his prosecution for two years.

Martin, a vice president and anti-money laundering investigations manager, acknowledged he oversaw policies and practices that blocked or stymied probes into suspicious transactions and said he acted at the direction of supervisors, or at least with their knowledge.


He told investigators that he and others allowed millions of dollars to pass through the bank without adequate scrutiny, despite being warned about the client.

Investigators say the business came from a Mexican customer who made more than $10 million in suspicious transactions.

They say a bank in Calexico on the Mexico border wanted more business.

Authorities seized the account in 2011 on suspicion it was being used to move millions of dollars in drug proceeds.

Martin and others were accused of failing to alert authorities to other suspicious activity at branches in Calexico and Tecate, another border town.

In 2009 and 2010, investigators say, employees allowed a Mexican client to withdraw nearly $500,000 in amounts just under federal reporting requirements, even though the client had been reported to the Treasury Department at least 25 times for suspicious activity.

The efforts to hide suspicious activity occurred from 2009 to 2012.

Rabobank, based in Utrecht, Netherlands, said U.S. authorities began investigating in 2013 whether the subsidiary violated the U.S. Bank Secrecy Act and other laws and regulations.

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