There's a wholesale clean up going on in Wealth management.
This time it's RBC that's in the mix. This from the Wall Street Journal
Inside Royal Bank of Canada’s Latin Misadventure
ENLARGE
By
Alistair MacDonald and
Rita Trichur
While some bankers celebrated, RBC’s compliance department soon raised a warning flag. Worried that Mr. Miranda’s accounts might attract scrutiny from global regulators over potential money laundering, some compliance officers began recommending that the accounts be shut down around 2007, according to people familiar with the episode.
But the Miami banker, Dirceu Magalhaes, successfully argued against axing the prize client, even after Brazilian prosecutors charged Mr. Miranda with corruption in 2012, these people say.
In 2013, Mr. Miranda’s accounts attracted the attention of a U.S. banking regulator, the Office of the Comptroller of the Currency, which that year deemed RBC’s anti-money-laundering controls unsatisfactory, according to people familiar with the matter.
The tensions between compliance and business officials at Canada’s largest bank, revealed in internal company documents seen by The Wall Street Journal, underscore the dilemma faced by many of the world’s financial giants as they balance the promise of lucrative accounts in emerging markets against the increased risk of regulatory action.
Banks from Standard Chartered PLC to HSBC PLC have been pulling out of serving the wealthy in some developing markets, in one of the unintended consequences of a crackdown by global regulators on money laundering and terrorist financing.
For RBC, which weathered the financial crisis to become one of the world’s largest banks, the OCC’s negative review was one in a long line of brushes with regulators and prosecutors over anti-money-laundering controls in its Latin America and Caribbean wealth-management businesses.
RBC moved to close down this business late last year after facing government investigations in several countries, including the U.S., Uruguay, and France. Just as it was unwinding its operations, RBC was contacted by the Department of Justice and by the Department of Homeland Security about separate Venezuelan accounts, according to people familiar with the matter. Those people said the Venezuelan accounts had, like Mr. Miranda’s, been previously flagged by internal compliance officers.
“There is always a war between compliance and bankers,” said Kim Manchester, whose Manchester CF advises banks on anti-money-laundering but who wasn’t commenting specifically on RBC. “Where banks get into trouble is when the banker wins again and again.”
A spokeswoman for RBC said that, due to client confidentiality, it wouldn’t comment on any individual or account, even to confirm or deny that they were customers. The spokeswoman said the bank has a strong record of global regulatory compliance. “RBC works within the legal and regulatory framework of every country in which we operate,” she said in an email.
The Justice Department declined to comment.
Mr. Miranda declined to comment for this article. A lawyer for Mr. Miranda said that his client hasn’t received any formal request from Brazilian courts to present his defense on the pending corruption case and declined further comment.
In a phone call, Mr. Magalhaes said that he had “no concerns” about allegations contained in this article, but declined further comment.
Star client
Much of the RBC drama has played out in an office on Brickell Ave. in Miami’s financial district. That office, where Mr. Magalhaes was based, acted as a U.S. hub to service rich clients across Latin America and the Caribbean as RBC opened offices in Brazil, Chile, Panama, Mexico and Uruguay in 2008 and 2009.Among Miami’s star clients was Mr. Miranda, who had made a fortune of over $500 million helping companies obtain licenses to set up in the Amazon city of Manaus, according to an internal RBC note seen by The Wall Street Journal. The former senator came from humble origins; some four decades ago he drove a Volkswagen Passat and had a net worth of $10,000, according to the document.
By 2008, Mr. Miranda owned real estate worth $5 million on Ilha das Cabras, or Goat Island, off the coast of São Paulo; three houses worth $10.5 million; a Learjet; four farms; and eight cars, including a Rolls Royce, the note said.
But RBC’s compliance department didn’t share the bankers’ enthusiasm for Mr. Miranda.
Some compliance officers were agitating for the account to be closed around 2007, soon after it was opened, because as a former politician he was viewed as a higher risk, a person familiar with the matter said. In August 2009, an article in Brazilian newspaper Folha de S. Paulo said a company held by Mr. Miranda’s family, KKW do Brasil, made a donation to the foundation of former Brazilian President José Sarney. The article didn’t accuse Mr. Miranda, his family or Mr. Sarney of wrongdoing. Still, press coverage in Brazil reminded compliance officials at RBC of how Mr. Miranda’s political past and connections would be scrutinized by regulators, according to two people familiar with the matter.
ENLARGE
