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ING: Neatly Settled

29 oktober 2018

ING: Neatly Settled

On 4 September, it was announced that ING had agreed a settlement with the Public Prosecution Service for an amount of €775 million for structural infringement of the Anti-Money Laundering and Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme; abbreviated to: WWFT) and for culpable money laundering. This news caused a big stir. Never before in the Netherlands had a settlement involving such a large amount been reached. Moreover, it was remarkable that ING as a company pleaded guilty while not a single senior ING official could be blamed personally. The settlement was the object of severe criticism from the media and politicians because it looked like a matter of class justice. They claimed that ING, and in particular the top-level management, escaped from criminal prosecution far too easily.

‘Business over compliance’

What was the case against ING about? The FIOD, the Dutch Fiscal Intelligence and Investigation Service (Fiscale inlichtingen- en opsporingsdienst) started a criminal investigation against ING when it turned out that suspect individuals and legal persons held accounts at ING. As a result, the bank was suspected of violating various WWFT provisions and culpable money laundering. According to the investigation, ING was systematically failing to implement ING’s so-called FEC CDD (Financial Economic Crime-Customer Due Diligence) policy. The bank did not screen clients on a structural basis, or did so insufficiently, and important signals were not picked up because the transaction monitoring system was set up in such a way that the number of alerts was limited.

According to the press release from the Public Prosecution Service, the bank had failed as a result of, on the one hand, a severe malfunctioning of the internal control procedures and, on the other hand, structural noncompliance with internal policies. Multiple divisions within ING had been responsible for compliance with the WWFT and senior management was hardly aware of these major shortcomings. Moreover, senior management did not sufficiently appreciate the importance of the FEC-CDD policy and did not focus on the proper implementation.

ING has repeatedly been ticked off for these shortcomings, both internally and by external agencies such as the Dutch central bank, De Nederlandsche Bank (DNB). However, this did not lead to fundamental changes.

Ultimately, a settlement was reached for structural infringement of Articles 3, 5, 8 and 16 of the WWFT (including the duty to perform client screening and the obligation to report unusual transactions), as well as Article 420quater of the Dutch Penal Code (culpable money laundering). This is in a nutshell the background to the settlement with ING.

Why a settlement?

According to the Public Prosecution Service’s Instruction for High Transactions and Special Transactions, the underlying principle is that in such large cases no settlement will be reached, ‘unless there is a good reason’. However, in this case the Public Prosecution Service considered a settlement with ING more effective than criminal proceedings. According to the official account of the facts, this is partly because ING publicly acknowledged and regretted the errors they made, they cooperated with the criminal investigation and they are going to implement a recovery plan under the supervision of DNB.

Therefore, we may conclude that a cooperative attitude linked to the willingness to make improvements was an important reason for this quick settlement of the criminal proceedings. Although the fine is quite substantial (but not all that insurmountable for ING), ING is actually getting a yellow card and the company does not have to leave the football pitch. It is being offered a serious opportunity to rectify matters which is rather positive. We believe that the legal ambiguity about the interpretation of the criminal accusation has also encouraged such an approach, although this was not explicitly used as an argument. When reading the official account of the facts, it becomes clear that the essence of the accusation is that ING has not taken sufficient care to prevent money laundering. A lack of awareness of the need to observe the compliance rules throughout the company also accounts for the fact that no specific persons were designated as guilty. The interpretation of the criminal law meaning of negligent behaviour is still under development. Under what circumstances are errors or negligence non-punishable? And when is it a matter of a conscious form of negligence in the domain of criminal law? Although we would like to see more legal precedents on this point, we do understand that companies prefer a quick future-oriented solution that is reached in consultation.


Are all animals equal?

We are curious to know whether other, smaller-sized service providers in the financial world (accountants, tax consultants, investment advisers) and companies with less significance for the Dutch economy, can also benefit from this ING treatment: cooperating with the investigation, acknowledging mistakes, making improvement plans, paying and that is it. However, up to now our practical experiences are quite different. In the good old days, a fraud case settlement was the rule rather than the exception. But nowadays, attempts to offer first offenders another chance are often discouraged. At the very least, an integral settlement is made impossible because participation of natural persons is out of the question. Therefore, if the company does reach a settlement (confession of guilt), this may often feel like a stab in the back for the employees involved. Moreover, the case against the natural persons can drag on for years and therefore it will still not be possible to entirely conclude the case.

We believe that the ING settlement should be followed as an example. Now that society’s opinion on the professional duties of financial service providers is changing enormously and their legal position is thus often unclear, an approach aiming at prevention and repair is much more reasonable. It is okay to criticise the facilitators’ work, but initially the angle should be positive.