PwC fined $25m over consulting work for Japanese bank

PWC has been fined $25m (£15m) and banned from some consulting work for two years by New York State’s financial regulator because of misconduct during work at Bank of Tokyo-Mitsubishi.

The deal, agreed yesterday with New York’s Department of Financial Services, settles allegations that the accounting giant helped Japan’s biggest lender hide US sanctions violations by “improperly” altering a report submitted to regulators.

Along with the fine, PwC must abstain from undertaking consulting work at financial institutions regulated by the state department for 24 months and implement a series of reforms. 

Under pressure from bank executives, PwC watered down a report on wire transfers in order to hide the bank’s dealings with blacklisted states, such as Iran and Sudan, the regulator said.

“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,” said Benjamin Lawsky, superintendent of financial services.

In 2007, the bank hired PwC to conduct a review of historical transactions with various countries under US sanctions. During the engagement, PwC is said to have uncovered “special instructions” issued by the bank to its employees to strip wire messages of information that would have triggered sanctions compliance alerts.

PwC later deleted any mention of the instructions and stated that its data was complete and its methodology was appropriate, the settlement said.

“This matter relates to a single engagement completed more than six years ago in which PwC searched for and identified relevant transactions that were self-reported to regulators by PwC’s client. PwC’s detailed report also disclosed the relevant facts that PwC learned subsequent to its search process,” Miles Everson, PwC’s US advisory leade, said in a statement.

“PwC is proud of its long history of contributing to the safety and soundness of the financial system by serving as subject matter experts in banking regulatory and compliance matters and the firm is committed to improving continuously and meeting changes in regulatory expectations. This resolution reinforces that commitment.”

During its suspension, PwC will work to implement a series of reforms to help address conflicts of interest in the consulting industry, the regulator said. The reforms are modelled on a similar agreement it reached with Deloitte Financial Advisory Services in 2013 when DFS suspended the firm for 12-months from accepting consulting engagements at DFS-regulated institutions.

Related reading