Former Rabobank VP admits scheme that allowed money laundering at Imperial County CA.
Former Rabobank VP admits scheme that allowed money laundering at Imperial County branches
Kristina Davis Contact Reporter
A California subsidiary of the Netherlands-based Rabobank announced this month it plans to plead guilty in connection with a long-running investigation into the bank’s anti-money laundering program.
The news comes just weeks after a former bank vice president admitted in San Diego federal court to turning a blind eye to suspected drug money flowing through Imperial Valley branches.
The case against George M. Martin, a vice president of Rabobank National Association and the bank’s anti-money laundering investigations manager, foreshadows the larger U.S. Department of Justice investigation into Rabobank and implicates other unnamed high-level personnel.
The U.S. Attorney’s Office in San Diego has offered Martin a deferred prosecution agreement, meaning he won’t be prosecuted with aiding and abetting violations of the Bank Secrecy Act so long as he continues to cooperate with the investigation into the bank. Martin, who lives in Texas, accepted the deal on Dec. 14.
Last week, Rabobank National Association announced to shareholders it has set aside $374 million in anticipation of settling DOJ investigations into its anti-money laundering compliance program. The announcement describes the expected upcoming guilty plea by the bank to be for “a single offense related to former employees’ withholding of information” from the U.S. Department of the Treasury nearly five years ago.
A Rabobank spokesman declined to discuss the case, saying in an email statement Friday: “As is our standard practice, we do not comment on former or current employees.”
Banks are required under the Bank Secrecy Act to help the government track and prevent money laundering, including filing reports called Suspicious Activity Reports, or SARs, to the U.S. Financial Crimes Enforcement Network, or FinCEN, when bank staff spot certain red flags in accounts.
Martin headed Rabobank’s California unit that was supposed to ferret out illegal activity, but his deferred prosecution agreement lays out a pattern of policy and procedures at the bank from 2009 to 2012 that let high-risk account holders avoid proper investigation, in turn allowing them to funnel millions of dollars in suspicious cash and wire transactions through the bank’s Tecate and Calexico branches, prosecutors said.
One way of doing this was to add accounts to a “verified activity list,” meaning the account holders were supposedly already vetted and didn’t require further scrutiny. In March 2012, Martin emailed his investigations staff stating that increasing the number on the verified activity list “continues to be an area of interest for (Martin) as this will continue to reduce the amount of actual suspects we have to work, month after month,” according to court documents.
There were less than 10 accounts on the verified activity list in 2009, a number that grew to more than 1,000 in 2012.
In February 2010, Martin and others were told about potential money-laundering activity in a Mexican-based business account at a Calexico branch, but they decided not to investigate further, or file a Suspicious Activity Report, because the bank’s staff wanted to solicit additional business from the customer, the deferred prosecution agreement says.
In August 2011, law enforcement seized those funds on suspicion the accounts were being used to move millions of dollars in drug proceeds — more than $10 million in suspicious cash and wire transactions passed through the account from 2009 to 2011. And even then, Martin and others didn’t take action on the account until October 2012, the agreement states.
Also in February 2010, Martin and others ignored red flags in an account held by a Mexican-based business that made large sequential withdrawals in suspicious patterns and issued about 50 checks for $9,500 each, likely to avoid the $10,000 deposit threshold that triggers a currency transaction report by the bank. The checks were cashed by 12 people who each got about $484,500 total on the same day at different times at the bank’s Tecate branch.
The account holders and their related businesses had at least 25 prior Suspicious Activity Reports filed against them. But, according to the deferred prosecution agreement, Martin told employees not to file reports for these transactions, writing in an email: “No more SARs for them!”
The deferred prosecution agreement means Martin must cooperate with investigators and also complete 50 hours of community service. If he follows through, then the case will be dropped against him after two years.
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