RBS 2009 Annual Report Download - page 338

RBS Group Annual Report and Accounts 2009336
Notes on the accounts continued
32 Memorandum items continued
On 22 December 2009, the OFT published a further report in which it
stated that it continued to have significant concerns about the operation
of the personal current account market in the United Kingdom, in
particular in relation to unarranged overdrafts, and that it believed that
fundamental changes are required for the market to work in the best
interests of bank customers. The OFT stated that it would discuss these
issues intensively with banks, consumer groups and other organisations,
with the aim of reporting on progress by the end of March 2010.
US dollar clearing activities
In connection with a previously disclosed investigation of ABN AMRO’s
New York Branch by US regulatory authorities, ABN AMRO and
members of ABN AMRO’s management continue to provide information
to the United States Department of Justice relating to ABN AMRO’s
dollar clearing activities, United States Department of Treasury
compliance procedures and other Bank Secrecy Act of 1970
compliance matters. ABN AMRO has reached an agreement in principle
with the United States Department of Justice that would resolve all
presently known aspects of the ongoing investigation, although no
written agreement has yet been reached and negotiations continue.
Under the terms of the agreement in principle, ABN AMRO and the
United States would enter into a deferred prosecution agreement in
which ABN AMRO would waive indictment and agree to the filing of
information in the United States District Court charging it with certain
violations of federal law based on information disclosed in an agreed
factual statement. ABN AMRO would also agree to continue co-
operating in the United States’ ongoing investigation and to settle all
known civil and criminal claims currently held by the United States for
the sum of US$500 million. The precise terms of the deferred
prosecution agreement are still under negotiation.
Securitisation and collateralised debt obligation business
The New York State Attorney General has issued subpoenas to a wide
array of participants in the securitisation and securities industry,
focusing on the information underwriters obtained as part of the due
diligence process from the independent due diligence firms. RBS
Securities Inc. has produced documents requested by the New York
State Attorney General, principally related to loans that were pooled into
one securitisation transaction and will continue to cooperate with the
investigation. More recently, the Massachusetts Attorney General has
issued a subpoena to RBS Securities Inc. seeking information related to
residential mortgage lending practices and sales and securitisation of
residential mortgage loans. These respective investigations are in the
early stages and therefore it is difficult to predict the potential exposure
from any such investigation. The company and its subsidiaries are co-
operating with these various investigations and requests.
Other investigations
In the UK, the OFT has been investigating the Group for alleged
conduct in breach of Article 101 of the Treaty on the Functioning of the
European Union and/or the Chapter 1 prohibition of the Competition Act
1998 relating to the provision of loan products to professional services
firms. The Group is co-operating fully with the OFT's investigation.
In April 2009 the FSA notified the Group that it was commencing a
supervisory review of the acquisition of ABN AMRO in 2007 and the
2008 capital raisings and an investigation into conduct, systems and
controls within the Global Banking & Markets division of the Group. The
company and its subsidiaries are cooperating fully with this review and
investigation.
In November 2009, the FSA informed the Group that it was commencing
an investigation into certain aspects of the policies of, and training and
controls within, certain of the Group’s UK subsidiaries relating to
compliance with UK money laundering regulations during the period
from December 2007 to December 2008. The company and its
subsidiaries are cooperating fully with this investigation.
In January 2010, the FSA informed the Group that it intended to
commence an investigation into certain aspects of the handling of
customer complaints. The scope of the proposed investigation
(including which businesses and subsidiaries are affected) is not yet
clear. The company and its subsidiaries intend to co-operate fully with
this investigation.
In the United States, the company and certain subsidiaries have
received requests for information from various governmental agencies,
self-regulatory organisations, and state governmental agencies
including in connection with sub-prime mortgages and securitisations,
collateralised debt obligations and synthetic products related to sub-
prime mortgages. In particular, during March 2008, the Group was
advised by the US Securities and Exchange Commission that it had
commenced a non-public, formal investigation relating to the Group’s
United States sub-prime securities exposures and United States
residential mortgage exposures. The company and its subsidiaries are
cooperating with these various requests for information and
investigations.