ABN-AMRO Struggles to Combat Fraud & Money Laundering

The biggest bank in the Netherlands, ABN-Amro, has been embroiled in a money-laundering investigation. The banks valuation sank by 12%, resulting in a $2 billion stock market value loss going up in smoke.

Dutch prosecutors said the lender failed to do due diligence on its exclusive clients for years, moving to end perceived lax monitoring of suspicious transactions, which for years were reported too late or not at all.

This is the second systemic Dutch lender to suffer a similar investigation. In September 2018, ING was fined a record $900 million for failing to spot criminal activities financed through its accounts.

ABN Amro was warned in August that it faced possible money laundering fines after the Dutch central bank ordered it to review all retail clients in the Netherlands for possible money laundering activity.

The Dutch state owns 56% of ABN Amro and finance minister Wopke Hoekstra has asked the bank to explain why he had not been informed earlier about the investigation.

The bank said at the time that sanctions may be imposed by the authorities but said it hadn’t made a provision for a possible fine as the “amount cannot be estimated at this time.”

Increased compliance costs and possible penalties add to the headwinds confronting European banks. Negative interest rates, lackluster economies, and Brexit are already taking a toll on profitability, forcing more lenders forcing the lenders to pass rising costs on to customers.

“There’s so much uncertainty for the shareholders now,” said KBW analyst Jean-Pierre Lambert by phone. “The big question is whether there’s actual money laundering involved in this case. That’s what the prosecutor’s investigation probably is trying to find out.”

Bloomberg / ABC Flash Point News 2019.