ABN AmroSource - https://fd.nl/beurs/1377737/hoe-abn-amro-talmde-met-de-aanpak-van-witwascontrolesWhere - Netherlands, Kingdom of the
Business line - Corporate Services
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In the summer of 2018, the financial sector was startled by reports of large-scale money laundering fraud at a respected European bank. Danske Bank's Estonian branches had been used for dubious transactions. There were rumours that other Scandinavian banks have not properly fulfilled their gatekeeper function.
That summer, the Dutch Public Prosecution Service completed Operation Houston, a large-scale investigation into inadequate checks on money laundering and terrorist financing at ING. A few months later, this led to the largest settlement ever in the Netherlands, amounting to € 775 million. In July, the Wwft, the law to prevent money laundering and terrorist financing, was further tightened and De Nederlandsche Bank (DNB) informed financial institutions accordingly.
The reports caused some nervousness at ABN Amro's head office. They caused chief compliance officer Gwendolyn van Tunen to sound the alarm with director Christian Bornfeld, who was responsible for IT, a Dane who had worked at Danske Bank. Van Tunen suggested it was the appropriate time to advocate at the coming board meeting for a more structured approach to monitoring suspicious transactions, with a separate function to assess customers and detect financial crime. Bornfeld recognized the problem and agreed to raise it.
Such plans had been discussed before, but never materialized. After the merger between ABN Amro Nederland and Fortis Bank in 2010, ABN Amro took a surprisingly long time to get the bank's compliance in order. Having more than six different IT systems did not help.
Then in the fall of 2014, a whistleblower reported dubious transactions at the Dubai office to the bank. The timing couldn't have been more annoying. The bank, which was then still fully owned by the state, was preparing for an IPO and could not afford a misstep. The tip led to a large-scale investigation into customer files. First in Dubai, then at all fifteen foreign divisions of the private bank and then at the domestic bank for wealthy individuals. The project ran for two years.
But in the end it was no more than sticking plasters, a recovery operation, which the bank knew. There was no time for a more fundamental approach, completely re-establishing the customer files. Such an operation would also cost an enormous amount of time and manpower and be expensive. In fact, hardly any banks consider that such an investment could well pay off in the future.
ABN Amro was given sixteen points for improvement from DNB and the European Central Bank before they will consent to a green light for the IPO. As a result, the file check at the consumer bank had to wait until after the IPO in November 2015, even though there were concerns whether the supervision of all transactions was adequate. They certainly did not get around to examining the customer files at the business bank. Both of these issues was remarkable, because in the spring of 2014 DNB noted that the bank was still doing too little to screen its customer files and that in September, the regulator would again investigate Compliance & Conduct, due to the imminent IPO in November.
Fundamentally, little or nothing changed at the bank after the IPO, even though after the arrival of Frank Elderson as supervisory director, DNB increasingly referred to the importance of the gatekeeper function of banks. It remained a matter of responding to signals. An illustrative example of this was that the compliance department, money laundering checks were faced with significant IT backlogs during part of 2015, all of 2016 and part of 2017. The reference lists had to be kept up to date manually for at least a year, with employees working overtime to keep the lists up-to-date.
A large-scale investigation and different approach to the client files at the business bank was further delayed, as other matters had the attention of top management. First, there was the difficult succession of CEO Gerrit Zalm. Under his successor Kees van Dijkhuizen, the top 100 of the bank would be radically refreshed in early 2017. A lot of knowledge left and many managers were given a new position, creating a vacuum in which momentum disappeared. At the end of 2017, the compliance department sent an urgent letter to the board that too many projects were on hold.
The fact that the controls were not functioning optimally was evident from the previously leaked Odebrecht file. The Brazilian construction company was discredited in March 2014 for paying billions in bribes to politicians and civil servants and was convicted in subsequent years. In 2015, 2016 and 2017, the bank reported unusual transactions by a Dutch customer - a trust office - of Odebrecht, but that was it. It took an online payment service provider to take decisive action and raise the alarm. In January 2017, the bank also received a heavy blow from DNB due to shortcomings in the money laundering checks in the trade finance department.
It would ultimately take until January 1, 2019 before ABN Amro established a separate Financial Crime Detection department, thanks to IT director Bornfeld persistence. The department expanded to 3,400 employees in two years, with staff working full-time on a daily basis to assess new and existing customers and to detect unusual transactions.
The initiative could not prevent the Public Prosecution Service and the Fiscale inlichtingen- en opsporingsdienst (FIOD) from invading the head office of ABN Amro in the autumn of that year. From reports by DNB and its own investigation, the Ministry of Justice concluded that frauds such as the swindling of FloraHolland by an employee in 2018 and 2019 are illustrative of failing money laundering checks at the bank. A suspected VAT fraud at a Rotterdam metal company over the same period is also not noticed at the bank.
Justice sees these cases as the tip of an iceberg: there is probably much more to be found beneath the surface. Certainly since the record settlement with ING on 4 September 2018, there is no longer an excuse for a financial institution that does not have its affairs in order, according to the judiciary. Debt money laundering - the suspicion against ABN Amro - means that due to negligence, a bank has deliberately taken a great risk that criminal money will pass through the bank.
Recently, the Public Prosecution Service discussed the findings with a delegation from the bank. Based on this, a settlement proposal is made. Not everyone at the bank is convinced that a settlement is the best approach. President-commissioner Tom de Swaan would reportedly like to have it come to a lawsuit, but CEO Robert Swaak would like to put an end to the matter.
And then there are the former directors, from team Zalm to team Van Dijkhuizen, who are all concerned about what a possible follow-up investigation by the PPS into actual leadership will mean for them.
