The Rabobank Groep in The Netherlands – a large, cooperative bank with
a market capitalization of roughly €690
billion and mainly operating in the agricultural industry, as well as the
(Dutch) mortgage market – was traditionally a very respectable bank with an
ironclad reputation inside and outside The Netherlands.
The bank did not exist of a classic headoffice and a number
of branches like ‘normal’ banks, but was built up around a few hundred
independent bank cooperations all over The Netherlands, topped off by an
initially service-oriented headoffice in Utrecht.
In recent years, the Dutch national bank DNB had been
strongly restricting the independence of the local bank cooperations in The
Netherlands, on behalf of the headoffice in Utrecht. This headoffice got a promoted legal status and was made much more responsible for the integral Dutch and
worldwide operations (i.e. in the eyes of the DNB), leading to one ‘official’
headoffice for both the national and international operations.
In spite of these measures, the local and cooperative
character of the bank, the personal way of doing business and its agricultural
focus had been maintained mostly, leading to a generally spotless reputation on the
national and international markets.
Apart from being THE authority in the area
of agricultural finance in The Netherlands, the bank exported its knowledge of
agricultural financing to other countries, among others The United States,
Hongkong, Australia and a number of European countries.
The first serious dent in the reputation of Rabobank’s international
operations came in 2013, when a number of London-based, international traders of
the bank were caught in the act of rigging the LIBOR interest
rates, in cooperation with their peers at a.o. Barclays bank in the United Kingdom and
UBS bank in Switzerland.
After this case had been settled with the international
authorities (Europe and the United States) and the responsbible traders had
been fired and penalized, it seemed to be business-as-usual again for this agricultural bank
with its international ambitions.
However, little over two years later a case emerged in the
United States of America that could have even more far-reaching consequences
for this bank.
This case was that a local branch of Rabobank North-America
had come under suspicion of widespread money-laundering for Mexican drugs
kartels.
In 2015 Bloomberg reported the following:
Among the Dutch bank’s
119 branches in California, the tiny outpost along Mexico’s border needed
weekly armored truck visits -- sometimes more than one -- to haul away all the
U.S. dollars being deposited.
The deluge, described
by a person familiar with the bank’s operations who said it picked up after
2010, came from businesses just across the border in Mexicali. While other Rabobank
branches needed currency to distribute to customers, Calexico was shipping it
out.
The armored car trips,
which persisted for years, offer a clue about what prosecutors may find in a
widening investigation into whether Rabobank Groep was vigilant enough against
money laundering. Rabobank shut the Calexico branch in January under a cloud as
federal investigators sought to determine if the bank had ignored signs that
its California operations may have been used by drug cartels to launder funds.
U.S. investigators now
have evidence that some bank officials may have impeded internal efforts to
scrutinize customer accounts and to report suspicious transactions, according
to the person who described the armored car runs and another person familiar
with the investigation. Furthermore, some bank officials may have tried to
cover up the alleged activity by withholding documents from the Office of the
Comptroller of the Currency, the people said. Federal authorities could view
any such actions as obstruction of justice.
When these allegations are true, this is a serious situation
for this Dutch bank that traditionally prides itself in doing business cleanly, transparently and responsibly. And it seems that the allegations came with a stockpile of
circumstantial evidence, as it isn’t normal that a normal bank in the
agricultural industry has to deal with (litterally) truckloads of cash money
from suspicious sources coming in every week. On top of that the executives are seemingly hampering the
investigation into the origin of this money.
As far as I know, the investigation did not lead to a court
case yet. This makes sense, as such financial/administrative probes are always
notoriously time consuming in the preparation phase, before they can even come
to trial. And the more evidence is lying around to be collected and
investigated, the more time it takes to inventorise it. This does not mean,
however, that it will never come to a trial or a verdict in this case. Especially not as the American financial authorities are always extremely vigilant against foreign bank organizations.
During my search for more information on these events, I
stumbled upon
this article from May, 2016, of which I print a few snippets.
A federal grand jury
is questioning former and current employees of Rabobank branches in San Luis
Obispo County as part of an investigation into allegations of money laundering
for Mexican drug cartels.
Beginning in about
2010, bank management would send armored trucks weekly to a branch in Calexico,
a tiny town just across the border from Mexicali, to pick up truck loads of
cash. Wire transfers were then sent from the Rabobank in Calexico to customers
across the border, according to a former Rabobank insider.
The Bank Secrecy Act
of 1970 requires banks in the United States to work with the government to
detect and prevent money laundering. But, bank officials allegedly instructed
employees at a Rabobank in San Luis Obispo County, where statewide compliance
checks occurred, to ignore signs of money laundering, the insider said.
These orders, not only
permitted the bank to increase profits, but also allegedly allowed tens of
million of dollars in drug money to be funneled across the border, the insider
said.
There you have it. Although one can’t totally trust news
sources these days, in this time of fake news, it seems that the American
government is building a rockhard case against the Rabobank when these
allegations can indeed be proven in the court of law.
A case that – when proven
beyond reasonable doubt – has the power to put Liborgate in the shadow and
make an effective end to the East-American operation (i.e. Rabobank North
America) of this Dutch bank, in my humble opinion.
It could even affect other
Rabobank operations in the United States, like the New York-based, Rabobank
North-American Wholesale subsidiary (Rabobank NAW) and perhaps even the whole,
global Rabobank organization, when the penalty exceeds a few billion dollars and therefore becomes life-threatening for the whole bank.
A group of Mexican human rights’ activists at least felt
confident enough to run the gauntlet and file a complaint in The Netherlands with the Dutch Public Prosecution. These activists did this, based upon the
allegations that the Rabobank helped the Mexian drugs mafia in their (extremely
bloody and societally spraining) decades-long drugs wars, with this alleged
massive 5-year long money laundering operation, thus having the blood of
thousands of innocent victims on their hands.
The following snippets are from the Dutch
newspaper Telegraaf:
The Duth Rabobank is
co-responsible for the thousands of victims of the bloody drugs war in Mexico.
This is stated by Mexican human rights’ activists. Their sollicitor Göran
Sluiter, who is also professor in International Criminal Law, has filed a
complaint against the bank at the Dutch Public Prosecution on their behalf.
These Mexican drugs
cartels make an annual profit or roughly $8 billion in the United States alone, with
drugs trades on the street and all this money [most of it is cash money – EL] has to go somewhere, according to
Sluiter.
“In the period between
2010 and 2015 the bank laundered money on behalf of the Mexican drugs cartels. This
handles a.o. about cash that street dealers made with the sale of Mexican drugs
to American drugs users. That money has been deposited at a branch of Rabobank
in the border city Calexico, lying in the deep south of the US. Afterwards the
bank rotunded the money to a series of other accounts, thus making that the
origin of the money was not easily visible anymore. By doing so the bank supported
organizations, which are responsible for large-scale murder, torture and
vanishings of (innocent) Mexican citizens”.
“This bank branch, of
which it was a publicly known fact that there was a conspicuously high number of large
cash deposits during the year, is part of Rabobank North America. This is a
full subsidiary of the Rabobank Groep. This means that the Dutch executive
management has the full authority regarding its activities in the US.
As the Rabobank officially
states that the bank are an advocate of societally responsible and sustainable
entrepreneurship, the headoffice cannot hide behind the statement that this all
took place very far away and hence out of sight of the executive management. What we want is that a criminal investigation is started into the role of the Rabobank Groep and its
factual executives. All too often, financial institutions can escape a verdict
with a settlement. We want to prevent that from happening again.
[…] We think
that the Rabobank Groep should have asked itself the question, if they should
be active in a region of the country, which is so dominated by extremely
violent drugs cartels in the first place.”
The awkward part about this developing story is that it is probably
true that the worldwide bank executives in Utrecht, The Netherlands, were clueless about the ongoing events near the
border of Mexico.
The executive management of the Rabobank Groep gives most attention to
the Dutch operation as it is by far the largest and most important operation of
the bank. The foreign subsidiaries and branches had always been the domain of
(formerly) Rabobank International, which was a separate part of the bank with a
quite independent status until a few years ago.
And even though these foreign subsidiaries came
more on the retina of the executive management – due to the increasingly stringent
finance and risk regulations and monthly (nowadays even daily) financial reporting required by the ECB – I
suspect that most of these foreign subsidiaries – and especially their branches all over their countries of residence – are still black boxes for most Dutch
executives.
As Liborgate already showed in 2013, it is deadly for
internationally operating banks like the Rabobank to give their (independent)
subsidiaries ‘too much leash’ by treating them as total black boxes, without
wanting to know to a T what is going on in their daily business and keeping a keen eye
on the corporate governance overthere.
In cases like these, it is too often true that “everybody
and their sister already knew what was going on in such bank branches, except
for the executive management in the local and global headoffice”.
And it simply can’t be true that a bank branch
receives two armoured trucks per week(!), shipping out stockpiles of cash money,
without (executive) people within the bank noticing that: that is a conspicuous
number of visits for a normal bank branch in the age of electronic payment and
virtual/electronic money. Either executives know that or they don't want to know that! There is no other option.
We don’t know whether these “insiders” – within Rabobank Calexico
and (perhaps) the headoffice of the Rabobank N.A. holding – were blackmailed or physically threatened by those drugs cartels or that they simply received “a slice of this
huge pie”, consisting of billions of dollars per year.
What we do know, however, is that central bank organizations
of such large multinational banks with loads of activities in foreign countries
and especially in such suspected regions must be very alert for fraud and (involuntary)
misconduct of their personnel.
Banks and other institutions where tons of money are going
around at a very high pace are always extremely vulnerable for fraud and criminal
activities, like money laundering, embezzlement and forgery of documents.
In such cases, the “ministerial responsibility” for the American and Dutch bank
executives is very clear: even if you didn’t know such things, you should have
known such things. You can’t run and you can’t hide for this obligation to know
things going on in your bank. Simply blaming others for that is not enough.
Therefore it seems yet again that Rabobank – as a local
Dutch champion of banking – is not ready
for the international implications of doing massive business abroad, in unknown
territories and opaque local situations.
Time will tell whether this was just a repairable mess up in Calexico, which the bank can handle
quite easily by paying a substantial penalty in a settlement case with the American
(and Dutch) authorities, or a fatal, deadly flaw for an overly ambitious, yet
less experienced bank from The Netherlands.
At least the Rabobank understands
once more that “playing international business successfully bank” is not
without risk.
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