M&T Must Forfeit Drug Cash for Failing to File ReportsAndrew Zajac and Elizabeth Dexheimer
M&T Bank Corp., whose takeover of Hudson City Bancorp Inc. has been stalled by regulators for almost two years because of lax internal controls, was ordered to forfeit $560,000 that a teller laundered for a drug gang.
U.S. District Judge James Bredar in Baltimore yesterday accepted the government’s claim in a February complaint that the teller converted proceeds of illegal drug sales from small denominations to $100 bills in at least eight transactions, ranging from $20,000 to $100,000, without notifying regulators. Banks are required by law to report any movement of cash in excess of $10,000.
M&T’s money-laundering controls have stalled its takeover of Paramus, New Jersey-based Hudson City, the biggest pending U.S. bank merger. The Federal Reserve has twice delayed the deal -- which some analysts have said may be the slowest moving in the industry’s history -- and pushed Buffalo, New York-based M&T to bolster its internal controls.
“This seems to be one example of where controls may have been deficient,” Sameer Gokhale, an analyst at Janney Montgomery Scott LLC in Philadelphia, said in a phone interview. “It reflects the reason why the regulators were concerned in the first place.”
Regulators haven’t given any assurances that they’ll approve the acquisition, which was originally valued at $3.7 billion when it was announced in August 2012.
The M&T teller in the case, Sabrina Fitts, 29, was sentenced to a month in prison followed by eight months of home detention for her role in the failure to file the mandatory reports. She worked at the bank’s Perry Hall, Maryland, branch outside of Baltimore.
Fitts was paid a 1 percent fee by a member of a drug trafficking organization for each transaction completed without a report, according to prosecutors.
“Through the cooperation we provided to law enforcement during an investigation into the illegal activities perpetrated by a former employee, we have assisted the U.S. Attorney’s Office with this prosecution and recovery,” Mike Zabel, a spokesman for M&T, said in an e-mailed statement. “This case shows how banks work closely with law enforcement to prevent and detect money-laundering.”
The case is U.S. v. $560,000 in U.S. Currency, 14-cv-00401, U.S. District Court, District of Maryland (Baltimore).