German lender Commerzbank AG is likely to pay more than $1 billion to U.S. authorities to resolve two probes examining whether it violated U.S. economic sanctions and money laundering laws, according to people familiar with the matter.
The U.S. Department of Justice, the Manhattan district attorney’s office and the New York Superintendent of Financial Services have been investigating Commerzbank’s alleged dealing with an Iranian state-sponsored shipping company, according to another person briefed on the investigations. The bank, which is Germany’s second-largest lender, allegedly continued to transact with the shipper after it was blacklisted by the U.S. in 2008 for allegedly supporting Iran’s nuclear program.
Those three offices had been closing in on a settlement with the bank for between $600 million and $800 million when Manhattan U.S. Attorney Preet Bharara notified officials of his investigation, according to two of the people familiar with the investigation. Prosecutors in that office are investigating poor money laundering controls at the bank that may be connected to an unrelated accounting fraud case, one of the people said.
Settlement talks stalled as U.S. officials decided whether to resolve the two investigations into the German bank in one settlement, a move that would add hundreds of millions of dollars to the potential penalties Commerzbank could pay, the people briefed on the matter said. The bank prefers to settle both probes at the same time, the person said.
It now appears likely that the bank will settle both probes simultaneously and pay more than $1 billion in penalties, the person familiar with the matter said. There is still a chance the matters could be settled separately, or that the final penalty number could be smaller, the person said. The investigation is at an advanced stage, though the settlement talks may continue for months, the people say.
The investigations come amid scrutiny from U.S. authorities of financial institutions, many of them European, who may have violated U.S. sanctions against blacklisted countries including Iran, Sudan and Cuba. The sprawling sanctions investigation, which was started in 2008 by the Manhattan district attorney’s office, has ensnared some of the world’s largest banks. BNP Paribas SA, France’s largest lender, pleaded guilty in July to dealings with sanctioned countries and agreed to pay $8.97 billion.
(Published by The Wall Street Journal – December 11, 2014)