A river of drug-cartel money flowed through the U.S. arm of a Dutch banking giant, and now federal investigators are pursuing criminal cases against former senior executives for allegedly covering it up, two people with knowledge of the probe said.
The Justice Department is considering whether to accuse Rabobank's ex-Chief Executive Officer John Ryan, the lender's former general counsel and its past compliance chief of obstructing U.S. bank examiners' efforts to dig into the firm's failures to prevent money laundering, said the people who asked not to be named because the investigation is ongoing.
A top banking regulator, the Office of the Comptroller of the Currency, is also aiming to sanction the executives, said one of the people. The OCC has already informed Laura Akahoshi, the ex-compliance chief, that it intends to ban her from the banking industry and fine her $50,000, a legal document reviewed by Bloomberg News shows.
The potential charges could close a dark chapter for Rabobank Groep, a Netherlands banking titan with $723 billion of assets. Thousands of miles away from its Dutch headquarters, California bank branches near the Mexican border became a pipeline for the profits of organized crime starting in 2009, according to the Justice Department. In February, the U.S. unit admitted guilt to felony conspiracy allegations and agreed to pay $369 million, including a $50 million OCC fine.
Internal emails
Court records in the bank's criminal case include internal Rabobank discussions and emails. Authorities say the correspondence shows that top executives in California tried to block employees and regulators from exposing the bank's misconduct — obstruction that the bank has admitted to. While the legal filings don't name the executives who allegedly misled watchdogs, one of the people said they include Ryan, Akahoshi and former general counsel Dan Weiss. Their identities were confirmed by two additional people with knowledge of the case.
Rabobank allowed Ryan to retire at the end of 2015, according to documents filed in the bank's criminal case. Akahoshi and Weiss were both fired in September 2015, the filings show.
Lawyers for Ryan and Weiss declined to comment. Akahoshi's attorney, Justin Weddle, declined to discuss any possible Justice Department investigation into his client, though he did say he has filed a response to the OCC contesting its findings and the potential penalties.
Greg Jones, a U.S. spokesman for Rabobank, said the February sanctions "brought closure to the previously reported investigation and compliance-program matters." He declined to discuss the bank's former employees. Spokesmen for the Justice Department and the OCC declined to comment.
The Justice Department hasn't yet filed public criminal charges against the executives, and prosecutors haven't finalized how they intend to proceed with the investigation.
Illicit money
Rabobank, in February court papers, admitted to being a conduit for at least $369 million in transactions that should have been flagged immediately to law enforcement. U.S. officials have traced the funds to narcotics trafficking, money laundering and other crimes — findings that Rabobank doesn't dispute. Bank officials knew by June 2010 that the accounts were likely linked to illicit activity, according to prosecutors.
Bringing criminal charges against prominent bankers is rare. In two money-laundering cases resolved in the past decade with punishments bigger than Rabobank's — HSBC Holdings Plc's $1.9 billion penalty in 2012 for violations including handling cash for drug cartels and February's roughly $600 million settlement with U.S. Bancorp for allegedly failing to report the suspicious transactions of a longtime customer — no individuals were charged.
The four-year Rabobank investigation, started during Barack Obama's administration, is wrapping up as the regulations underpinning it are under siege. As part of President Donald Trump's drive to cut back government red tape, banking watchdogs are looking to overhaul anti-money laundering rules that force lenders to track and report suspicious transactions to federal agencies. Joseph Otting, the former banker who Trump tapped to lead the OCC, has said the regulations are "almost impossible" for banks to comply with.
Akahoshi is a former OCC official herself who Rabobank hired a decade ago because of her expertise with money-laundering rules. The criminal investigation stems from accusations that in 2013 she and the other senior executives deliberately withheld from regulators an internal report that documented Rabobank's shortcomings, the two people said.
Misleading regulators
Rabobank commissioned the analysis after one of its compliance officials learned the company wasn't properly filing suspicious-activity reports, which inform the government about especially large or dubious transactions. The Rabobank compliance official took her concerns to Ryan and Weiss in September 2012, according to court documents filed with the bank's plea agreement. The official briefed the executive management board the following month and also allegedly warned the bank's senior managers against trying to mislead regulators about what was found, the court documents show.
The report written by Crowe Horwath, an outside consulting firm hired by Rabobank, found a litany of deficiencies, including major backlogs of suspicious-activity filings and a failure to address "the most significant money-laundering risks to the institution," according to the OCC document that describes allegations against Akahoshi.
Emails highlighted by the Justice Department and OCC show that when OCC examiners asked for the report, Akahoshi said the bank didn't have it. Akahoshi, Ryan and Weiss decided among themselves that because the company hadn't yet accepted a final version, that answer was accurate, the emails show.
"I wonder why they're asking for this now," an executive who sources identified as Weiss wrote to Akahoshi. "My guess is that copies of the draft are floating around although our intention was to not keep any draft documents."
'Misleading statements'
When the OCC persisted that it would accept any version of the Crowe report, even a preliminary copy, the Rabobank executives again demurred. Akahoshi told the regulator that the consulting firm had given a PowerPoint presentation to Rabobank officials but hadn't provided a physical document. So the OCC went directly to Ryan, the former CEO, and told him the examiners were already aware that the bank had a copy of the report.
In the end, Akahoshi sent it to the OCC, including a cover sheet signed by Ryan that still "contained a number of false and misleading statements," according to documents from prosecutors and the OCC.
