Fresh regulatory action showed no let-up by US authorities in punishing organisations over breaches of sanctions and anti-money laundering rules.

US regulators have fined  PricewaterhouseCoopers, the global professional services firm, $25 million for improperly altering a report on anti-money laundering and sanctions compliance by Bank of Tokyo Mitsubishi.

The New York State Department of Financial Services has also banned PwC from accepting consulting work at financial institutions regulated by the organisation for two years.

The announcement of the action comes in the wake of actions taken by US authorities against banks and other institutions over AML breaches and sanctions violations over countries such as Iran and Sudan. The most severe so far has been a $8.97 billion fine imposed on France’s BNP Paribas.

"This matter relates to a single engagement completed more than six years ago in which PwC searched for and identified relevant transactions that were self-reported to regulators by PwC’s client. PwC's detailed report also disclosed the relevant facts that PwC learned subsequent to its search process,” Miles Everson, US advisory leader, said in a statement from PwC.

"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. This resolution reinforces that commitment,” he added.

Historical transaction review
According to the New York regulator, two PwC partners were responsible for supervising the “historical transaction review report”, or HTR, concerning the Japanese bank. The regulator said both persons – who were not named – have retired from PwC. “During the HTR, a PwC director led the firm’s technology and data collection team.  This director is presently a PwC partner,” the regulator 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 regulator said.

"We are continuing to find examples of improper influence and misconduct in the bank consulting industry. As a regulatory community, it may well be advisable for us to take a hard look in the mirror and ask whether we are doing enough to root out and investigate this troubling web of conflicts. 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," Benjamin Lawsky, superintendent of financial services at NYDFS, said in a statement.

A more than year-long DFS investigation uncovered that PwC – under pressure from BTMU executives – improperly altered an “historical transaction review" report submitted to regulators on wire transfers that the bank performed on behalf of sanctioned countries and entities, the statement said. PwC was asked in June 2007 to review the bank’s dollar-clearing activity from 1 April, 2006.

In May 2008, PwC found that BTMU had issued special instructions to bank employees to strip wire messages of information that would have triggered sanctions compliance alerts – after the bank denied having such a policy only weeks before in a meeting with regulators, the statement continued.

“PwC understood that this improper data manipulation could significantly compromise the HTR’s integrity and PwC inserted into an earlier draft of the report an express acknowledgement informing regulators that 'had PwC know[n] about these special instructions at the initial phase of the HTR then we would have used a different approach in completing this project’. Specifically, PwC would have conducted a more in-depth, forensic investigation into the bank's scheme – rather than simply a more rote, mechanical review of the transactions provided to it by the bank. In other words, the discovery of the Bank's scheme to falsify wire transfer information cast doubts on whether PwC had a complete set of data to review (among other issues),” the statement said.

“However, at the bank’s request, PwC ultimately removed the original warning language from the final HTR Report the bank submitted to regulators and, in fact, inserted a passage stating the exact opposite conclusion,” it said. The passage read: "[W]e have concluded that the written instructions would not have impacted the completeness of the data available for the HTR and our methodology to process and search the HTR data was appropriate".

The PwC report also deleted information such as the English translation of BTMU’s wire-stripping instructions, which referenced the bank doing business with "enemy countries" of the US; it deleting a regulatory term of art that PwC used throughout the report in describing BTMU’s wire-stripping instructions and replaced it with a nondescript reference that lacked regulatory significance.

Director

Referring to a director that, it said, was involved in the report, the regulator said that on “numerous occasions, this director made statements in emails to PwC partners and employees that elevated his apparent concern for client satisfaction over the need for objective inquiry”.

“No-one at PwC reprimanded or even told the director that his comments were inappropriate because they drew the firm’s objectivity seriously into question,” the regulator said.

Bank of Tokyo-Mitsubishi UFJ, part of Mitsubishi UFJ Financial Group, reached a settlement with Lawsky’s department in 2013 and agreed to pay $250 million for violations of US sanctions laws, according to Bloomberg.