Press Release

December 15, 2016

Contact: Richard Loconte, 212-709-1691


Misconduct Included Processing Numerous Suspicious Transactions Involving Shell Companies through the New York Branch and Deliberately Concealing Information from Bank Regulators

Intesa Compliance Officer Said that Transactions Were Being Cleared in a Manner Outside of the Bank’s Procedures Because it Allegedly Was More Efficient and that a Risk-Based Policy Meant that “If You Miss One, You Miss One”

DFS Directs Bank to Strengthen Compliance Procedures at New York Branch, Extend Engagement of Independent Consultant and Submit Revised Compliance Plans

Financial Services Superintendent Maria T. Vullo today announced that Intesa Sanpaolo S.p.A. and its New York branch bank will pay a $235 million fine and extend the term of engagement with its current independent consultant as part of a consent order entered into with the New York State Department of Financial Services (DFS) for significant violations of New York anti-money laundering and Bank Secrecy Act (AML/BSA) laws. The violations announced today include severe compliance failures over several years stemming from deficiencies in the implementation and oversight of its transaction monitoring system. In addition, an investigation by DFS found that the Bank deliberately concealed information from bank examiners. Since being confirmed in June, Superintendent Vullo has led DFS enforcement actions for violations of AML laws, against Mega Bank of Taiwan, which was fined $185 million for violating AML laws and Agricultural Bank of China, which was fined $215 million, and has finalized a new AML regulation effective January 1, 2017.

“Global financial institutions must be the first line of defense in the war against international terrorism, cybercrime and tax evasion,” Superintendent Vullo said. “Effective and responsible transaction monitoring systems are an essential tool in the battle against illicit transactions and terrorist financing in this age of risk. There is little doubt that the negligent conduct of this bank is the type of conduct that can fuel international criminal activity, thereby seriously compromising the security of the international financial system. DFS uncovered sweeping violations requiring that this institution must make immediate and fundamental changes in the way it conducts business.”

Today’s action further highlights the importance of DFS’s new risk-based anti-terrorism and anti-money laundering regulation that requires regulated institutions to maintain programs to monitor and filter transactions for potential BSA/AML violations and prevent transactions with sanctioned entities. The final regulation requires regulated institutions to submit an annual board resolution or senior officer compliance finding confirming the steps taken to ascertain compliance with the regulation.

DFS found that the Bank’s compliance staff utterly mismanaged its transaction monitoring system and repeatedly failed to properly identify suspicious transactions until they were discovered by a DFS-appointed independent consultant. DFS installed a consultant in the Bank’s New York branch due to serious issues related to the Bank’s anti-money laundering compliance that had been identified by regulators going back to 2002.

DFS’s investigation of Intesa’s New York branch uncovered AML/BSA violations which included the following:

  • An Intesa compliance officer, when questioned about unauthorized clearing practices, said that transactions were being cleared in a manner outside of the Bank’s prescribed written procedures because it was more efficient. The Bank’s computerized clearing system, he claimed, had generated a large number of “false positives.” The unauthorized process being used was acceptable, he said, because a risk-based policy meant (at least to him) that “if you miss one, you miss one.”
  • The Bank missed thousands of alerts generated by the Bank’s automated system, which employs keywords and algorithms to identify suspicious transactions. An electronic alert is generated when a keyword or algorithm spots a suspicious transaction. The transaction is then supposed to be screened through another electronic system so it can be reviewed in more detail.
  • In 2014 alone, approximately 41 percent of the alerts improperly closed through the unauthorized and ad hoc clearing process were not “false positives” but were proper alerts that required further investigation, of which some may have required further escalation.
  • Intesa specially trained certain employees to handle transactions involving Iran to obfuscate the money-processing activities so they could not be readily flagged as transactions tied to a sanctioned entity.
  • In another situation, the anti-money laundering compliance officer in the New York branch left it to individual reviewers to decide for themselves how to review transactions based on what “works best” for them – against the Bank’s written guidelines and contrary to established industry practices.

The DFS investigation discovered that from approximately 2002 to 2006 Intesa used opaque methods and practices to conduct more than 2,700 U.S. dollar clearing transactions, amounting to more than $11 billion, on behalf of Iranian clients and other entities possibly subject to U.S. economic sanctions.  By processing transactions involving entities possibly subject to U.S. sanctions using these non-transparent methods, Intesa subverted controls designed to detect illegal transactions in the New York branch and thwarted the effective supervision of the New York branch by regulators.

The consent order requires Intesa to extend the engagement of its independent consultant for up to two years to further analyze and test the Bank’s efforts to remediate its BSA/AML violations.  DFS retains the right to extend the term of the engagement if it is determined that an extension is necessary for the Bank to complete necessary remediation plans.  The Bank is required to review New York branch transactions from 2014 to the present to ensure compliance with anti-money laundering laws, federal sanctions laws, and New York laws, rules and regulations.  The independent consultant will perform an audit of those efforts and issue an audit report to DFS.

Within 60 days of the consultant’s report, the Bank must submit to DFS the following:

  • A revised BSA/AML compliance program;
  • A program to ensure the identification and timely reporting of all known or suspected violations of law or suspicious transactions to law enforcement and supervisory authorities;
  • An enhanced customer due diligence program;
  • A revised internal audit program; and
  • A plan to enhance oversight by Bank management of the New York branch’s compliance with BSA/AML requirements, state laws and regulations, and OFAC regulations,

A copy of the consent order can be found here.