PricewaterhouseCoopers (PwC) Regulatory Advisory Services is facing a 24-month suspension from accepting consulting engagements from New York state firms as well as a $25 million payment to the Empire State. The consulting service, which frequently puts out reports on the state of the insurance industry, must also undergo a series of reforms after improperly submitting a report to regulators regarding sanctions and anti-money laundering compliance at Bank of Tokyo Mitsubishi (BTMU).
According to findings from the New York State Department of Financial Services, PwC bowed to pressure from BTMU executives and removed a warning in the supposedly objective report on the Bank’s scheme to falsify wire transfer information for Iran, Sudan and other sanctioned groups.
Superintendent Benjamin Lawsky condemned PwC as well as what he sees as ongoing improprieties in the financial services industry.
In a statement on the disciplinary action, Lawsky said:
“We are continuing to find examples of improper influence and misconduct in the bank consulting industry. As a regulatory community, it may be well 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.”
PwC’s actions were discovered after a more than year-long investigation by the DFS. According to the body, PwC altered its historical transaction review (HTR) of BTMU detailing wire transfers the Bank performed on behalf of the sanctioned countries.
During May 2008, PwC found that BTMU had told its employees to strip wire messages of information that would have triggered sanctions compliance alerts—a policy the Bank had just denied it had in place.
Understanding the impropriety of the actions, PwC originally put in a “warning” in early drafts of the report that the wire-stripping activities may have compromised the completeness of the report. However, at the Bank’s request, PwC removed the warning and said the wire-stripping had no impact on the report. It also deleted most of its discussion of the wire-stripping activities and BTMU’s potential impropriety.
During PwC’s suspension, it will work to implement a series of reforms to help address conflicts of interest in the consulting industry.
