The following was posted by the Netherlands Public Prosecution Service on 4 September 2018
ING Bank N.V. (ING) in Amsterdam has accepted and paid a settlement of EUR 775,000,000 offered by the Netherlands Public Prosecution Service (Openbaar Ministerie, hereinafter referred to as NPPS).
The NPPS has accused ING in the Netherlands of having violated the Anti-Money Laundering and Counter Terrorism Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme, hereinafter referred to as the AML/CTF Act) for many years and on a structural basis. This took place in such a way that the bank is also accused of culpable money laundering: the bank failed to prevent bank accounts held by ING clients in the Netherlands between 2010 and 2016 from being used to launder hundreds of millions of euros.
ING is an internationally operating bank. ING’s banking services in the Netherlands are provided by the business unit ING Bank Netherlands (hereinafter referred to as ING NL).
According to the NPPS, ING NL did not properly fulfil its role as gatekeeper of our financial system, as outlined in the AML/CTF Act. The AML/CTF Act is a law that seeks to prevent financial crime such as money laundering and terrorism financing, as far as possible. Under the AML/CTF Act, gatekeepers are required to conduct client due diligence and report unusual transactions to the Financial Intelligence Unit (hereinafter referred to as FIU).
The criminal investigation revealed that ING NL was seriously deficient in this respect. As a result, clients were able to use accounts held with ING NL for criminal activities for many years, virtually undisturbed. According to the NPPS, ING NL should have seen that certain cash flows through bank accounts held by ING NL clients were possibly the result of crime. In that respect, the bank wrongly took insufficient action. For this reason, the NPPS accuses the bank of not only violating the AML/CTF Act, but also of culpable money laundering.
Structural lack of attention for AML/CTF Act compliance
The investigation by the Dutch Fiscal Information and Investigation Service (Fiscale inlichtingen- en opsporingsdienst, hereinafter referred to as FIOD) started at the beginning of 2016.
The reason was that companies or individuals that had come under suspicion in several criminal investigations held accounts with ING NL, leading to suspicions that ING NL was not sufficiently investigating clients, was insufficiently monitoring bank accounts and did not report unusual transactions, or reported them too late.
Over the course of this investigation, the suspicion arose that ING NL’s behaviour with regard to these specific clients was not just an isolated incident, but the result of structural shortcomings at ING NL in implementing the policy to prevent financial economic crime. The absence or insufficient conducting of client due diligence led to ING NL’s acceptance of clients without sufficiently investigating the risks associated with those clients. Clients were also classified in the wrong client segments. Client relationships and bank accounts were not sufficiently monitored and, when necessary, not terminated by the bank in a timely manner.
The compliance department was understaffed and inadequately trained. Partly due to the limited personnel capacity, the system for monitoring transactions was set up by the bank in such a way that only a limited number of money laundering signals were generated. Only the proverbial tip of the iceberg was investigated. In short, the bank did not sufficiently recognise the risks of money laundering. If an unusual transaction was nevertheless recognised, it was regularly not reported to the FIU, or was reported too late.
The criminal investigation revealed that the risks run by the bank actually materialised. ING NL missed potential signals of money laundering.
The investigation looked into four cases. These cases revealed that ING NL clients were able to misuse the bank accounts they held with ING NL. For example,
- CASE 1 = an international telecom provider transferred bribes worth tens of millions of dollars via its bank accounts with ING NL to a company which was owned by the daughter of the then president of Uzbekistan. ING NL reported the unusual transactions to the FIU far too late. In addition, ING NL did not sufficiently investigate the identity of the actual owner of the company.
- CASE 2 = According to the NPPS, a women’s underwear trader was also able to launder approximately EUR 150,000,000 through its bank accounts held with ING NL. It should have been clear to the bank that the monetary flows had little to do with the lingerie trade and were therefore unusual. The NPPS has accused the suspects in this case of laundering hundreds of millions of euros of criminal money. Here, too, the bank did not conduct sufficient client due diligence and the company was classified in the wrong segment. The monitoring system did generate alerts regarding unusual monetary flows, but these were wrongfully and almost without further investigation set aside by the bank as ‘not unusual’.
- CASE 3 = Another case concerns a one-man business in building materials with no address in the Netherlands. The company had a business account with ING NL to which 15 mobile ATMs were linked. Contrary to ING’s rules, these mobile ATMs were placed and used by the one-man business in Suriname. They were allegedly to be used for purchases. Investigations have shown that the one-man business actually acted as a currency exchange office. A total amount of EUR 9,000,000 was transferred to the one-man business’ bank accounts with ING NL, even though no building materials were purchased for that amount. In reality, debit cards were used in the mobile ATMs in Suriname in exchange for cash. ING NL carried out almost no client due diligence and the company’s transactions were not properly monitored.
- CASE 4 = A case was also investigated in which, over a year, more than EUR 500,000 was deposited in cash into the ING bank accounts of two connected companies. These companies were apparently involved in the import of and trade in fruit and vegetables from South America. This was probably a front for money laundering. Only one of the cash deposits was flagged by the bank as potential money laundering. In addition, ING NL was far too late in reporting an unusual transaction to the FIU.
According to the NPPS, ING NL should and could have also recognised that the funds that were held in ING’s accounts in these cases probably originated from crime. It failed to do so, and even when ING NL did recognise the fact, it failed to respond adequately. That is why the NPPS has accused ING NL of being guilty of the crime of culpable money laundering.
Cases are illustrative
According to the NPPS, the cases described above serve as examples.
The NPPS has access to multiple indications that the AML/CTF Act has been violated, as well as signals of culpable money laundering. These signals stem from other criminal investigations or from media reports.
These signals were not investigated in detail, but confirm the picture of ING NL falling short in complying with the AML/CTF Act, as a result of which the bank was unable to prevent criminal money from being laundered, in spite of the fact that, in its role as gatekeeper, the bank should have made efforts to prevent this from happening.
ING NL was warned on multiple occasions by the Dutch Central Bank (De Nederlandsche Bank N.V., hereinafter referred to as DNB). DNB also took formal measures. Certainly from 2010 onwards, ING NL was aware of the weaknesses in the implementation of its policy but failed to address them adequately. Enhancement programmes were in place, but were not carried out with enough vigour by ING NL.
For instance, although ING NL did look at solutions for individual incidents, the structural problems in the monitoring system were not sufficiently recognised and addressed. In consultation with DNB and the FIOD, the NPPS decided to approach the bank’s conduct as criminal activity.
For a detailed description of the offenses, including criminal offenses, see the statement of facts (pdf, 315 kB).
The criminal investigation brought to light the fact that one of the main reasons for the shortcomings was the insufficient attention paid by ING NL to compliance risk management (business over compliance). The responsibility for compliance with the AML/CTF Act rests with three different divisions of the bank. None of these divisions oversaw the whole picture. This in part explains why senior management was not fully aware of the seriousness of the shortcomings, and their persistence. The NPPS has therefore attributed the offenses to the organisation as a whole. Many individual persons are responsible for part of the culpable behaviour. The offences are therefore not individually attributable to specific persons, not even the management at ING NL. The Supreme Court (Hoge Raad) sets a high bar for prosecuting individuals for directing criminal offences. In this case, not only must awareness be proven, but also that those persons consciously instigated criminal offences or deliberately failed to stop them. The ING NL investigation did not demonstrate that this was the case.
The NPPS sees the payment of a total of EUR 775,000,000 as an appropriate and effective settlement. This amount consists of a fine of EUR 675,000,000 and a disgorgement of EUR 100,000,000. In addition, the bank will enact compliance measures.
According to the NPPS, the facts in this case are extremely serious. As a systemic bank, ING Bank N.V. bears a great responsibility, a responsibility that goes beyond clients or shareholders. It shares responsibility for the reliability of our financial system and can and should make an important contribution to its integrity. Service providers such as banks must protect society against abuse of the financial system for laundering criminal funds or financing terrorism. ING NL can therefore specifically be expected to demonstrate corporate social responsibility and to maintain high integrity principles.
The investigation revealed that ING NL has seriously betrayed the trust placed in the bank. The serious shortcomings in implementing the policy have resulted in some clients who were engaged in criminal activities being able to use bank accounts held with ING NL for years, virtually undisturbed. To determine the fine, the NPPS considered the seriousness of the facts and the nature of the accused. In addition, the fact that the accused cooperated with the investigation and already during the course of the investigation elaborated and started to implement a far-reaching remediation and enhancement programme was taken into account. This programme is subject to intense monitoring by DNB. The NPPS considers the fine of EUR 675,000,000 to be appropriate. It is a fine that deals a tangible blow to the accused and does justice to the shocked legal system.
In addition, EUR 100,000,000 is being disgorged. This is the amount that ING NL has wrongfully earned through savings accumulated over a period of years on expenditure for personnel whose task was to ensure implementation of the compliance policy.
The settlement will also have an impact on the future, as ING NL has acknowledged that there have been serious shortcomings, and the bank has taken a significant number of measures to put its house in order. DNB will ensure that the remediation measures are carried out properly. For the NPPS, the introduction of an adjusted compliance policy at ING NL and the supervision of that policy by DNB were decisive factors in offering this settlement.