Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, June 18, 2013

Deloitte Agrees to One-Year Suspension from Consulting Work at New York Financial Institutions

Deloitte Financial Advisory Services agreed to a one-year suspension from consulting work at financial institutions regulated by the New York State Dept. of Financial Services because of alleged misconduct during its consulting work at Standard Chartered on anti-money laundering issues.  It also agreed to make a $10 million paymment and to implement a set of reforms designed to address conflicts of interest in the consulting industry.  CUOMO ADMINISTRATION REACHES REFORM AGREEMENT WITH DELOITTE OVER STANDARD CHARTERED CONSULTING FLAWS

According to the press release, in 004, Standard Chartered executed an agreement with the New York State Banking Department and Federal Reserve Bank of New York, which identified several compliance and risk management deficiencies in the anti-money laundering and Bank Secrecy Act controls at Standard Chartered's New York branch. The agreement required Standard Chartered to retain a qualified independent consulting firm to review anti-money laundering issues at the bank. Standard Chartered engaged Deloitte to conduct that review.

DFS’s investigation into Deloitte’s conduct during its consultant work at Standard Chartered found that the company:

■Did not demonstrate the necessary autonomy required of consultants performing regulatory work. Based primarily on Standard Chartered's objection, Deloitte removed a recommendation aimed at rooting out money laundering from its written final report on the matter to the Department. The recommendation discussed how wire messages or “cover payments” on transactions could be manipulated by banks to evade money laundering controls on U.S. dollar clearing activities.

■Violated New York Banking Law § 36.10 by disclosing confidential information of other Deloitte clients to Standard Chartered. A senior Deloitte employee sent emails to Standard Chartered employees containing two reports on anti-money laundering issues at other Deloitte client banks. Both reports contained confidential supervisory information, which Deloitte FAS was legally barred by New York Banking Law § 36.10 from disclosing to third parties.

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