PwC fined by New York regulator over work for Japanese bank

PricewaterhouseCoopers LLP (PwC) will pay $25m and be banned for two years from some consulting work to settle New York state regulators’ allegations that the accounting firm mishandled its work for Bank of Tokyo-Mitsubishi UFJ, one of Japan’s largest banks.

The New York State Department of Financial Services alleged that PwC watered down an anti-money-laundering report it did for the Japanese bank that was submitted to regulators. PwC has agreed to the fine and the ban, which prevents one of its units from performing certain consulting work for New York-regulated banks.

The settlement stems from the consulting firm’s work for Bank of Tokyo-Mitsubishi UFJ. In 2007, as the bank was facing regulatory scrutiny for doing business with countries blacklisted by the United States, it hired PwC to conduct a review of transactions with Iran and other countries under sanctions, including some transfers routed through its New York branch.

The firm, which eventually submitted a report to regulators in June 2008 detailing the illicit transactions, certified that its work was objective and impartial. However, in the settlement, the regulators accused the firm of “improperly altering” the report.

In an initial draft of the report, PwC included paragraphs from a bank manual outlining “special instructions” employees should follow to ensure that transactions with Iran and other countries under United States sanctions did not draw attention.

Under pressure from the bank, the consulting firm deleted those paragraphs in the version of the report sent to regulators.
Initially, the report said that had PwC known about “these special instructions” at the start of the review, “then we would have used a different approach for completing this project.”

However, in the version sent to regulators, PwC said: “our methodology to process and search” transactions “was appropriate”. It also said: “We have concluded that the written instructions would not have impacted the completeness of data available” for the review, a conclusion that PwC originally attributed to the bank.

PwC maintains that the changes in its report were made in response to comments from the bank and the bank’s attorney, and that the final version of the report submitted to regulators contained all the substantive information needed.

In a statement, PwC said the agreement “relates to a single engagement completed more than six years ago in which PwC searched for and identified relevant transactions”.