U.S. Said to Look at Rabobank Officials in Mexico Cash Probeby
Employees being interviewed in laundering-controls inquiry
Three-year probe looking into movement of cartel drug proceeds
A U.S. grand jury is weighing testimony about several current and former Rabobank Groep officials as the government seeks to tie alleged money-laundering lapses at the bank to specific individuals, according to people familiar with the matter.
Prosecutors in San Diego and Washington have interviewed Rabobank employees over the past few months about anti-money laundering controls at branches along the U.S.-Mexico border, bringing some of these past and current workers to testify before the grand jury about the actions of certain executives, said two people.
The U.S. Justice Department, having wrung large penalties out of other global banks for failing to comply with sanctions and money-laundering rules, has said it will prioritize holding high-ranking bankers responsible. Prosecutors have spent three years investigating whether Rabobank NA -- the lender’s U.S. retail banking unit -- ignored signs that Mexican drug cartel money was moving through the bank, and are now presenting evidence that could be used against the bank as well as some of its officials, said the people.
Rabobank, a cooperative based in Utrecht, Netherlands, promotes itself as one of Europe’s cleanest and safest banks. Signs of troubles at its U.S. operations began in 2006, when the Office of the Comptroller of the Currency warned the bank’s anti-money laundering controls may have been lacking. Rabobank later came under scrutiny by the Internal Revenue Service and other U.S. agencies.
The bank, which has since closed some of its U.S. operations along the Mexico border and has said it is cooperating with authorities, said it wouldn’t comment on an ongoing investigation or on current or former staff members. The Justice Department declined to comment.
In interviews with prosecutors and before the grand jury, bank workers have been asked how at least two executives in California -- Stephen Byron, the bank’s U.S. director of Bank Secrecy Act compliance, and Laura Akahoshi, Rabobank NA’s former chief compliance officer who left the lender last fall -- oversaw the handling of potentially suspicious activity by clients, according to the two people, who asked not to be identified because the investigation is confidential.
No current or former bank executives have been accused of any wrongdoing, and it isn’t clear whether individuals will ultimately be charged.
Akahoshi, through an attorney, declined to comment. Byron declined to comment.
Prosecutors have also asked about the role of Ronald Blok, who was chief executive officer of Rabobank NA from 2006 to 2012, one of the people said. A lawyer for Blok had no immediate comment.
In general, winning individual convictions for lax money-laundering controls is difficult, said Matthew Schwartz, a former federal prosecutor now at Boies, Schiller & Flexner LLP in New York who isn’t involved in the Rabobank matter.
The Bank Secrecy Act requires banks to keep certain records and alert the government of suspicious client transactions. To win a conviction for violating the BSA, Schwartz said, prosecutors have to show that an individual understood the law and intentionally violated it.
Because it’s easier to show systemic failures as opposed to willful lapses by specific people, the BSA has primarily been used in prosecutions of institutions, said Jonathan Lopez, a former federal prosecutor in the Justice Department’s money-laundering section.
“What creates a systemic failure is very diffuse," said Lopez, a partner at Orrick, Herrington & Sutcliffe LLP in Washington.
Prosecutors have assembled thousands of pages of documents, including e-mails from senior managers, one of the people said. They have asked employees about the reporting of large cash deposits and withdrawals from a Rabobank branch in Calexico, California, as well as how suspicious transactions were reported internally and to regulators, the person said.
Prosecutors have expressed confidence that they have enough evidence to charge the bank, although final decisions are still a few months away, the person said. Prosecutors are also examining whether Rabobank or any of its officials withheld information from the Office of the Comptroller of the Currency, which could lead to additional charges for obstruction, according to the two people.
Akahoshi and Byron held high-level posts at the bank after it rapidly expanded retail operations in California through the purchase of regional lenders before the financial crisis. Akahoshi joined the bank in 2008 from the OCC, where her job had included some oversight of the bank, and she hired Byron as her deputy responsible for overseeing the anti-money laundering program. Akahoshi moved to the Netherlands and then to Asia for the bank before leaving last year.
Rabobank in November was freed from a two-year deferred prosecution agreement imposed after admitting its involvement in the rigging of benchmark interest rates. In that case, Rabobank paid more than $1 billion in penalties. Several of its former traders were criminally charged and some were convicted.