PwC has been fined $25m (£15m) and suspended from consulting work for New York-regulated banks for two years after the New York State Department of Financial Services (DFS) found the firm had watered down an official report to the regulator and failed to provide details of a Japanese bank's US sanctions violations
The DFS has not found PwC guilty of breaking the law, but said that it had ‘improperly altered’ and ‘whitewashed’ an oversight report on sanctions and money-laundering compliance for one of its clients, the Bank of Tokyo-Mitsubishi (BTMU).
In 2007 the firm’s consultancy business undertook a review of wire transfers that the bank performed on behalf of sanctioned countries and which were routed via the bank’s New York branch. The DFS claimed the leading Japanese bank put pressure on PwC to delete details in the report on wire transfers submitted to regulators to hide its dealings with Iran, Myanmar and Sudan, which are blacklisted by the US.
In a statement, DFS said: ‘Under pressure from BTMU executives, PwC removed a warning in an ostensibly “objective” report to regulators surrounding the bank's scheme to falsify wire transfer information for Iran, Sudan and other sanctioned entities.’
The DFS said it had four copies of the ‘historical transaction review’ (HTR) report submitted to regulators on wire transfers that the bank performed on behalf of sanctioned countries and entities, and that these showed PwC’s assessments had been ‘progressively sanitized based on changes demanded by the Bank.’
Benjamin Lawsky, DFS superintendent of financial services, said: ‘When bank executives pressure a consultant to whitewash a supposedly 'objective' report to regulators - and the consultant goes along with it - that can strike at the very heart of our system of prudential oversight.’
Under the terms of the settlement, PwC's Regulatory Advisory Services unit will be suspended for 24 months from taking on consulting work at financial institutions regulated by DFS and must undertake a series of reforms.
Miles Everson, PwC’s US advisory leader, said: ‘PwC is proud of its long history of contributing to the safety and soundness of the financial system by serving as subject matter experts in banking regulatory and compliance matters and the firm is committed to improving continuously and meeting changes in regulatory expectations.’
In 2013, the DFS reached a similar settlement with Deloitte Financial Advisory Services that involved a 12-month suspension of consulting activities and a $10m (£6m) fine over claims the firm had watered down an oversight report about Standard Chartered in London at the request of officials at the bank.
In June 2013, BTMU agreed to pay $250m (£150m) to New York State for deleting information from $100bn (£60bn) in wire transfers that authorities could have used to police transactions with Iran and other sanctioned countries. The bank processed 28,000 such transactions through New York between 2002 and 2007.
