Back to top

Analyst Blog

The Royal Bank of Scotland Group plc (RBS - Snapshot Report) reached a settlement with the U.S. law enforcement authorities in the money laundering case and agreed to pay a penalty for it. The company will pay a compensation of $100 million and take suitable measures to avoid such issues, going forward.  

As a matter of fact, Royal Bank of Scotland was accused of substantial lapses related to its compliance with anti-money laundering norms. The company was allegedly involved in misappropriating funds through the U.S. financial system to countries under the sanctioned list of the United States, which includes Iran, Sudan, Burma and Cuba.

From the period between 2002 to 2011, Royal Bank of Scotland failed to disclose information about the identities of the sanctioned countries in almost 3,500 dealings worth roughly $523 million. The company was accused of listing the actual names of the banks in sanctioned countries, instead of their identification codes. This prevented the payment system from automatically including the name of the sanctioned country in messages sent to the U.S. clearing banks.

The U.S. is coming down hard on banks who have concealed information regarding transactions involving clients in the sanctioned nations. The settlement with Royal Bank of Scotland demonstrates the efforts of the U.S. regulators to terminate illegal cash flow through its financial system.

Many major banks have already paid penalties to the U.S. regulators related to money laundering. Earlier in June, Mitsubishi UFJ Financial Group, Inc. (MTU - Analyst Report) paid $250 million concerning misappropriation of capital. Similarly, in December last year, HSBC Holdings plc (HSBC - Analyst Report) paid $1.9 billion for substantial lapses in its anti-money laundering compliance.

Moreover, in Aug 2012, the New York State Department of Financial Services reached a $340 million settlement with Standard Chartered plc for its involvement in money laundering in Iran. Further, in the same year, the U.S. government held Netherlands-based ING Groep NV (ING - Snapshot Report) responsible for transferring billions of dollars through the American financial system to nations that were economically restricted by the U.S. As a result, ING bank had to pay $619 million as penalty.

Royal Bank of Scotland currently carries a Zacks Rank #4 (Sell).

Please login to Zacks.com or register to post a comment.