RBS 2013 Annual Report Download - page 484
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Notes on the consolidated accounts
482
32 Memorandum items continued
• a plan to oversee compliance by the Group’s U.S. operations with all
applicable U.S. laws, rules, regulations, and supervisory guidance,
• a Bank Secrecy Act/anti-money laundering compliance programme
for the RBS plc and RBS N.V. branches in the U.S. (the U.S.
Branches) on a consolidated basis,
• a plan to improve the U.S. Branches’ compliance with all applicable
provisions of the Bank Secrecy Act and its rules and regulations as
well as the requirements of Regulation K of the Federal Reserve,
• a customer due diligence programme designed to reasonably
ensure the identification and timely, accurate, and complete
reporting by the U.S. Branches of all known or suspected violations
of law or suspicious transactions to law enforcement and
supervisory authorities, as required by applicable suspicious activity
reporting laws and regulations, and
• a plan designed to enhance the U.S. Branches’ compliance with
OFAC requirements.
The Order (which is publicly available) identified specific items to be
addressed, considered, and included in each proposed plan or
programme. The Group also agreed in the Order to adopt and implement
the plans and programmes after approval by the regulators, to fully
comply with the plans and programmes thereafter, and to submit to the
regulators periodic written progress reports regarding compliance with the
Order. The Group has created, submitted, and adopted plans and/or
programmes to address each of the areas identified above. In connection
with the Group's efforts to implement these plans and programmes, it
has, among other things, made investments in technology, hired and
trained additional personnel, and revised compliance, risk management,
and other policies and procedures for the Group's U.S. operations. The
Group continues to test the effectiveness of the remediation efforts
undertaken by the Group to ensure they are sustainable and meet
regulators' expectations. Furthermore, the Group continues to work
closely with the regulators in its efforts to fulfil its obligations under the
Order, which will remain in effect until terminated by the regulators.
The Group may become subject to formal and informal supervisory
actions and may be required by its US banking supervisors to take further
actions and implement additional remedial measures with respect to
these and additional matters. The Group's activities in the United States
may be subject to significant limitations and/or conditions.
US dollar processing consent order
The Group’s operations include businesses outside the United States that
are responsible for processing US dollar payments. On 11 December
2013 the Group and The Royal Bank of Scotland plc announced that they
had reached a settlement with the Board of Governors of the Federal
Reserve System (Fed), the New York State Department of Financial
Services (DFS), and the Office of Foreign Assets Control (OFAC) with
respect to The Royal Bank of Scotland plc's historical compliance with US
economic sanction regulations outside the US. In settlement with the
above authorities, The Royal Bank of Scotland plc agreed to pay US$100
million in total, including US$50 million to the Fed, of which US$33 million
was deemed to satisfy the OFAC penalty, and US$50 million to DFS.
As part of the settlement, the Group and The Royal Bank of Scotland plc
entered into a consent Cease and Desist Order with the Fed (the Order)
indicating, among other things, that: (a) the Group and The Royal Bank of
Scotland plc lacked adequate risk management and legal review policies
and procedures to ensure that activities conducted outside the United
States comply with applicable OFAC regulations; (b) from at least 2005 to
2008, certain business lines within The Royal Bank of Scotland plc
developed and implemented policies and procedures for processing U.S.
dollar-denominated funds transfers through unaffiliated U.S. financial
institutions involving parties subject to OFAC Regulations that omitted
relevant information from payment messages necessary for the U.S.
financial institutions to determine whether these transactions were carried
out in a manner consistent with U.S. law; and (c) the Group continues to
implement improvements in its oversight and compliance programme for
activities involving offices outside the United States that impact the ability
of U.S. financial institutions to comply with applicable OFAC sanctions. In
the Order (which is publicly available), the Group agreed to create an
OFAC compliance programme to ensure compliance with OFAC
regulations by the Group's global business lines outside of the United
States, and to adopt, implement, and comply with the programme. The
programme is to be submitted to the Federal Reserve Bank of Boston
(Reserve Bank) for approval by 11 March 2014.
Sixty days after approval of the programme, the Group is to complete a
global OFAC risk assessment and submit it to the Reserve Bank and the
FCA. The Group also agreed in the Order to hire an independent
consultant (subject to approval by the Reserve Bank and the FCA) to
conduct an annual OFAC compliance review involving a review of
compliance policies and their implementation and an appropriate risk-
focused sampling of U.S. dollar payments. The Order further requires the
Group to submit quarterly written progress reports to the Reserve Bank
detailing the form and manner of all actions taken to secure compliance
with the Order.
It was also announced that the US Department of Justice and the New
York County District Attorney’s Office had concluded their parallel
criminal investigations and do not intend to take any action against The
Royal Bank of Scotland plc.
US/Swiss tax programme
In August 2013, the DOJ announced a programme for Swiss banks (the
Programme), to settle the long-running dispute between the US tax
authorities and Switzerland regarding the role of Swiss banks in
concealing the assets of US tax payers in offshore accounts. The
Programme provides Swiss banks with an opportunity to obtain
resolution, through non-prosecution agreements or non-target letters,
concerning their status in connection with the DOJ’s investigations.
Coutts & Co AG (Coutts), a member of the Group incorporated in
Switzerland, has notified the DOJ that it intends to participate in the
Programme based on the possibility that some of its clients may not have
declared their assets in compliance with US tax laws. The Programme
requires a detailed review of all US related accounts. The review is due to
be completed and the results presented to the DOJ later in 2014.