Benjamin Lawsky Fills in for AWOL Feds

Jonathan Weil joined Bloomberg News as a columnist in 2007, and his columns on finance and accounting won Best in the Business awards from the Society of American Business Editors and Writers in 2009 and 2010.
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Benjamin Lawsky is at it again.

The superintendent of the New York State Department of Financial Services today said Bank of Tokyo Mitsubishi-UFJ Ltd. agreed to pay $250 million to settle allegations that it violated state banking laws when it carried out transactions with Iran and other countries subject to international sanctions. You have to wonder, too, what's going on over at the Treasury Department's Office of Foreign Assets Control.

In December, the Treasury division concluded a parallel investigation of Bank of Tokyo and settled for only $8.5 million. The contrast reinforces the perception that the feds are going light on large financial institutions, and that Lawsky is out to fill the vacuum where he can using New York state laws.

It's the second big case for Lawsky this week. On June 18, Lawsky said Deloitte Financial Advisory Services would pay $10 million to resolve the agency's investigation into its consulting work for Standard Chartered Plc, the London-based bank that paid $340 million to the state to settle money-laundering claims last year. The agreementwith Deloitte included a one-year ban on accepting new consulting work related to matters pending before the New York agency.

The Deloitte agreement had one feature that was particularly striking -- and rare for a regulator. The consulting firm, which is an affiliate of the Big Four accounting firm Deloitte & Touche LLP, admitted to violations of state banking law.

In the settlement agreement, Deloitte admitted that it broke state law by "knowingly disclosing confidential supervisory information to'' Standard Chartered about other banking clients.
Admissions such as these should be a model for all regulators. The New York department's consent order with Bank of Tokyo didn't include any direct acknowledgements, but at least it didn't have the dreaded language saying the company "neither admits nor denies" the allegations.

The way the consent order with Bank of Tokyo was structured, representatives for both the company and the regulator signed their names to a list of the agency's findings, which made it seem that Bank of Tokyo agreed they were true. One of the provisions said Bank of Tokyo "estimates that it cleared approximately 28,000 U.S. dollar payments through New York worth close to $100 billion involving Iran, and additional payments involving Sudan and Myanmar."

There's a glimmer of hope that other regulators may change their usual "no-admit" approach, at least on the margins. Securities and Exchange Commission Chairman Mary Jo White this week said the agency's enforcement division will seek more admissions of wrongdoing from defendants as a condition of settling cases. The agency's default position for decades has been for defendants to neither admit nor deny its claims.

"There may be particular individuals or institutions where it is very important it be a matter of public record that they acknowledge their wrongdoing, and if not you go to trial," White said.

If Lawsky's department can do it now and then, surely the SEC and others can, too.

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