Royal Bank of Scotland Group Plc, Britain’s biggest taxpayer-owned lender, is being probed by the Federal Reserve and Justice Department over whether it violated sanctions against Iran, two people briefed on the talks said.
The investigation was triggered after the bank disclosed information to the U.S. authorities following a review of the business Chief Executive Officer Stephen Hester started after he joined the Edinburgh-based bank in 2008, said the people, who asked not to be identified because the probe isn’t public. The Financial Times reported the negotiations earlier today.
RBS opened “discussions with U.K. and U.S. authorities to discuss its historical compliance with applicable laws and regulations, including U.S. economic sanctions,” the bank said in an Aug. 3 filing that didn’t mention the regulators or Iran. “Although the group cannot currently determine when the review of its operations will be completed or what the outcome of its discussions with U.K. and U.S. authorities will be, the investigation costs, remediation required or liability incurred could have a material adverse effect.”
Standard Chartered Plc (STAN) paid $340 million this month to New York’s Department of Financial Services to settle claims it helped Iran launder about $250 billion in violation of federal laws. Regulators are investigating four European banks, including Deutsche Bank AG, for alleged violations involving oil trading and Iran, an attorney with knowledge of the matter said earlier this month.
Commerzbank AG (CBK) said in 2010 that it was cooperating with U.S. authorities on an investigation of transactions involving Iran. Germany’s second-biggest bank said at the time that it couldn’t asses the outcome of the investigation or how much it might cost.
BNP Paribas SA (BNP), France’s largest bank, and Credit Agricole SA (ACA), each said as recently as March that they were cooperating with U.S. authorities regarding payments involving countries, individuals or entities subject to U.S. economic sanctions.
BNP is “conducting an internal review” of certain U.S. dollar payments involving those countries, the Paris-based bank said in its 2011 registration document published in March. “Similar reviews conducted by numerous financial institutions relating to actual or purported violations of Office of Foreign Assets Control regulations have resulted in settlements involving the payment of fines and penalties, some of which have been significant,” BNP said in the filing.
Credit Agricole is also reviewing similar payments following requests from authorities including the office of the District Attorney of New York County, it said in its 2011 registration document, also published in March.
“It is currently not possible to know the outcome of these internal reviews and requests, nor the date when they will be concluded,” the bank said in the report.
Bertrand Cizeau, a spokesman for BNP Paribas, and Anne-Sophie Gentil, a spokeswoman for Credit Agricole, declined to comment beyond the information in the documents.
Benjamin Lawsky, the DFS superintendent who investigated London-based Standard Chartered, isn’t looking into RBS, the people said. Barbara Hagenbaugh, a Fed spokeswoman, David Neustadt at the DFS and Gina Talamona, a spokeswoman for the Justice Department, declined to comment. Sarah Small, an RBS spokeswoman, declined to comment beyond the bank’s regulatory disclosure. Commerzbank spokesman Nils Happich declined to comment.
RBS and the Justice Department reached an agreement in 2010 to settle charges that ABN Amro Holding NV, the Dutch lender RBS acquired in 2007, conspired to defraud the U.S. by engaging in transactions with state sponsors of terrorism. The firm was subject to a deferred-prosecution agreement, which required a forfeiture of $500 million.
RBS fell 0.8 percent to 235.6 pence at the close in London trading. The shares have risen 17 percent this year after sliding 48 percent in 2011.
The U.K. rescued RBS at the height of the financial crisis, injecting 45.5 billion pounds ($72 billion) into the lender, making it the costliest bailout of any financial institution. RBS trades at a level equivalent to less than half the price at which the taxpayer bought its 82 percent stake in the bank.