Israel Discount Bank of New York settles in money laundering case

Newsday
Dec. 17, 2005

NEW YORK -- Israel Discount Bank of New York has agreed to pay up to $25 million to settle state and federal claims that it allowed illegal Brazilian money transmitters to move $2.2 billion through its offices over the past five years.

The IDB account of an illegal Brazilian money transmitter, Transmar Tourismo Ltda., was frozen in New York, Assistant District Attorney Daniel Castleman said Friday in announcing the agreement. Castleman said the account contained $158,000.

Based on evidence gathered in New York, Castleman said, Brazilian police executed search warrants at Transmar's Sao Paulo offices, seized records, and arrested three of its employees on charges of violating Brazilian money laundering and other laws.

Castleman said it was unclear whether the three could be prosecuted in New York.

The IDB settlement followed a probe by the state Banking Department, the Manhattan district attorney's office and federal bank regulators. During the investigation they found that the money moved through IDB from 2000 and until this year.

Castleman said investigators did not know who the money belonged to, or where it was going. He said they learned of the suspicious money transmissions to IDB through leads developed while investigating another unlicensed money transmitter in 2004.

"They're supposed to report suspicious activity," Castleman said. "They weren't doing that. They were not living up to their anti-moneylaundering responsibilities."

Mallory Stevens, senior vice president of Israel Discount Bank of New York, reportedly announced on Nov. 30 that her bank was talking to state authorities about alleged "deficiencies" in their anti-moneylaundering controls.

Stevens was not immediately available for comment Friday.

The IDB settlement calls for the bank to pay $8.5 million to the city and state to cover the investigation costs. The bank could face additional civil penalties totaling up to $16.5 million to be paid to the state Banking Department, the U.S. Treasury Department's enforcement agency, and the Federal Deposit Insurance Corp. (FDIC).

The settlement has three parts: the cooperation agreement with the Manhattan district attorney's office allows the bank to avoid prosecution if it lives up to all of its agreements, and two parallel cease and desist agreements with the state Banking Department and the FDIC.