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ING pays $900 million to resolve Dutch ‘corrupt practices’ case

Dutch bank ING Group NV said Tuesday that it agreed to pay a fine of €675 million ($782 million) and disgorge €100 million ($115 million) to resolve criminal investigations into lax business practices.

The Amsterdam-based bank said its resolution with the Dutch Public Prosecution Service related to requirements for client on-boarding, the prevention of money laundering, and corrupt practices.

ING said in a disclosure filed with the U.S. Securities and Exchange Commission that the investigations “established serious shortcomings in the execution of policies to prevent financial economic crime” from 2010 to 2016.

Ralph Hamers, CEO of ING, said the bank “sincerely regrets” that it didn’t “adequately fulfill its role as gatekeeper to the financial system, helping fight financial crime.”

“Not meeting those standards is unacceptable and ING takes full responsibility,” Hamers said.

ING said it has also received “information requests” from the SEC and has been cooperating with the requests.

The bank said it “expects that this matter will also be resolved with the SEC without further payment or the imposition of further conditions.”

ING first disclosed the criminal investigations in an SEC filing in March 2017, according to FCPA Tracker.

Last year ING Group served 37.4 million clients in more than 40 countries, generating revenues of about $20 billion. The bank has about 54,000 employees worldwide.

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Here’s the disclosure from ING Groep N.V.’s  Form 6-K filed with the SEC on September 4, 2018:

ING reaches settlement agreement with Dutch authorities on regulatory issues in the ING Netherlands business

  • Settlement agreement with Dutch Public Prosecution Service; ING agrees to pay a fine of €675 million and €100 million for disgorgement;
  • ING acknowledges serious shortcomings in the execution of customer due diligence policies to prevent financial economic crime at ING Netherlands in the period investigated (2010-2016);
  • ING sincerely regrets that these shortcomings enabled customers to misuse accounts of ING Netherlands;
  • ING has initiated measures against a number of (former) senior employees with broader responsibility for the safeguarding and execution of FEC CDD policies and procedures in ING Netherlands, including holdbacks of variable remuneration and suspension of duties;
  • ING Netherlands has taken various steps to enhance its compliance risk management and will further strengthen its compliance culture and awareness;
  • ING is committed to conducting its business with integrity, which includes compliance with applicable laws, regulations and standards in each of the markets and jurisdictions in which it operates;
  • U.S. Securities and Exchange Commission expected not to take further actions.

ING announced today that it has entered into a settlement agreement with the Dutch Public Prosecution Service (DPPS) relating to previously disclosed investigations regarding various requirements for client on-boarding and the prevention of money laundering and corrupt practices. Under the terms of the agreement ING has agreed to pay a fine of €675 million and €100 million for disgorgement.

ING has fully cooperated with the DPPS investigation. It has also undertaken an internal investigation, the results of which have been shared with the Dutch Central Bank (DNB). The investigations established serious shortcomings in the execution of policies to prevent financial economic crime (FEC) at ING Netherlands in the period investigated (2010-2016). The identified broader shortcomings include: CDD files missing or being incomplete, assignment of incorrect risk classifications, the failure to have the (periodic) CDD review process in order, failure to exit business relationships in a timely manner, insufficient functioning of the post-transaction monitoring system, classifying clients in the wrong segments and insufficient availability of qualitative and quantitative human resources.

During the period investigated the execution of ING Netherlands’ FEC policies resulted in the termination of ING’s relationship with thousands of clients. Nevertheless the shortcomings identified resulted in clients having been able to use their bank accounts for, inter alia, money laundering practices for a number of years.

ING sincerely regrets that as a result of the above shortcomings ING Netherlands did not adequately fulfil its role as gatekeeper to the financial system, helping fight financial crime. “As a bank we have the obligation to ensure that our operations meet the highest standards, especially where it comes to preventing criminals from misusing the financial system. Not meeting those standards is unacceptable and ING takes full responsibility,” said Ralph Hamers, CEO of ING.

“We take this very seriously. We are taking a number of robust measures to strengthen our compliance risk management and support a strong risk culture and will be making further improvements to ensure we can play a full role in contributing to protecting the integrity of the financial system,” said Vincent van den Boogert, CEO of ING in the Netherlands.

In the investigations no evidence or indications were found of (former) employees having actively cooperated with clients who used or may have used banking services for potential criminal activities nor indications of (former) employees having received personal gains. The identified shortcomings that occurred in the period investigated are not attributable to some individual persons but rather collective shortcomings at all responsible management levels, i.e. business, compliance and control functions.

ING has initiated measures against a number of (former) employees in senior management positions who had a broader responsibility for the safeguarding and execution of FEC CDD policies and procedures in the Netherlands. These measures include holdbacks of variable remuneration and suspension of duties. In the context of today’s announcement the members of the Executive Board of ING Group, in consultation with the Supervisory Board, find it appropriate to forego their variable remuneration over 2018.

ING is committed to conducting its business with integrity, which includes compliance with applicable laws, regulations and standards in each of the markets and jurisdictions in which it operates. Meeting the highest standards wherever we do business is an ongoing effort. ING has started various initiatives at ING Netherlands to further strengthen its compliance risk management:

  • An enhancement program to ensure compliance with ‘know your customer’ (KYC) and ‘client activity monitoring’ requirements. This includes enhancing management of customer information and improving effectiveness of the control framework applicable to the FEC domain, especially with respect to client activity monitoring capabilities.
  • Centralizing and simplifying operational KYC activities into one ‘KYC Centre’ across divisions, introducing standard processes and tooling, allowing ING Netherlands to manage these activities more effectively.
  • Set-up Client Risk Committees across business units, deciding on client on-boarding and exit escalations to ensure KYC risk mitigation.
  • An engagement program to strengthen the internal compliance culture and awareness by better enabling employees to act in both the letter and the spirit of the law, empowered by their organisation and supported (and enforced) by compliance departments.
  • Active involvement in and contribution to the taskforce FEC-RAAD, where Dutch authorities that have supervisory, control, prosecution or investigation tasks cooperate with financial sector actors to strengthen the integrity of the sector. It does this by taking preventive action to identify and combat threats to this integrity.

ING also joined forces with DNB and the Dutch Banking Association (NVB) to harmonize efforts and knowledge in the fight against financial crime and actively participates in various taskforces and project teams in this field.

As part of the settlement announced today, ING has agreed to pay a fine of €675 million and €100 million for disgorgement. In determining the amount of the fine, the DPPS has taken into account the financial strength of ING (‘ability to pay’). Next to that, the amount reflects the seriousness, extent and duration of the identified shortcomings but also expresses the fact that it was not possible to determine to which extent and for what amounts bank accounts at ING Netherlands were actually misused. The disgorgement amount represents the underspend by ING Netherlands over the period in scope on staffing for implementation and execution of FEC CDD policies and procedures. These amounts will have a combined impact on ING Group’s third quarter 2018 net result of €775 million, to be recorded as a special item. The settlement announced today does not affect the strength of ING, the execution of our strategy nor our commitment to our customers, shareholders and other stakeholders.

As previously noted, in connection with the investigations ING has also received information requests from the U.S. Securities and Exchange Commission (SEC). ING has been cooperating with these requests. Based on the settlement agreement announced today, ING expects that this matter will also be resolved with the SEC without further payment or the imposition of further conditions.

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Richard L. Cassin is the publisher and editor of the FCPA Blog.

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