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Union Bank agrees to settle criminal charge

September 18, 2007|From Times Wire Services

Union Bank of California agreed to forfeit $21.6 million to settle a criminal charge that it failed to maintain an effective program to prevent money laundering, even after promising to do a better job of complying with federal regulations, the U.S. Justice Department said.

The bank, the principal subsidiary of San Francisco-based UnionBanCal Corp., also agreed to pay $10 million to the Office of the Comptroller of the Currency and the Treasury Department's Financial Crimes Enforcement Network as it settled the case without admitting or denying the allegations.

The Justice Department said the bank had accepted and acknowledged responsibility for its conduct. To avoid criminal prosecution, the bank must fully implement significant anti-money-laundering measures within a year.

"Banks that knowingly disregard their legal obligations under the Bank Secrecy Act are easily exploited by drug cartels and other criminals," said Assistant U.S. Atty. Gen. Alice Fisher.

UnionBanCal Chief Executive Masaaki Tanaka said the bank had devoted considerable resources in the last several years to fix weaknesses and deficiencies in its compliance programs.

"But that of itself does not diminish the seriousness of this matter," Tanaki said in a statement issued by the company. "We will continue to work with our regulators to ensure that our focus on compliance is effective, sustainable and responsive so that failures of this kind are not repeated in the future."

The action by U.S. authorities came about a month after American Express Co. agreed to pay $65 million for failing to detect similar illegal transactions laundered through a subsidiary of the credit card giant.

The government began probing Union Bank after Mexican currency exchange houses used its accounts to launder proceeds from cocaine shipments, the Justice Department said.

Regulators concluded the bank had failed to adequately monitor those accounts from 2003 to 2005.

As a result, it didn't file hundreds of required regulatory documents called suspicious activity reports in a timely manner, authorities said.

In 2005, the bank signed a memorandum of understanding with authorities under which it was required to improve its systems for detecting such activities and notifying authorities.

The comptroller's office said an examination last year found that the bank's compliance was still ineffective, in violation of the terms of the memo.

Union Bank said it expected to meet the conditions of the deferred-prosecution agreement within the one-year time frame, spokesman Stephen Johnson said in a telephone interview.

"We still have work to do," he said.

UnionBanCal shares fell 54 cents to $58.10 on Monday, before the settlement was announced.

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