Deloitte agrees to one year New York ban

Deloitte Financial Advisory Services LLP has agreed to forego doing new consulting work for financial firms in New York state for one year for its work at Standard Cahrtered involving anti-money laundering issues.

Under the terms of the agreement, the company would also pay the state of New York $10 million.

According to Deloitte FAS, it looked forward to working with the regulator to "establish best practices".

UK-based Standard Chartered, last year agreed to pay $340 million to the Department of Financial Services (DFS), and another $227 million to the Department of Treasury along with a fine of $100 million imposed by the Federal Reserve, to settle charges of sanctions violation on Iran, Burma, Libya and Sudan (see: StanChart in pact with US government over deals with Iranian banks).

Following investigation into Deloitte FAS's work at Standard Chartered, New York's DFS found that the firm failed to demonstrate the necessary autonomy required of consultants performing regulatory work.

It added Deloitte had also violated New York banking law by disclosing confidential information of other clients to Standard Chartered.

In addition to the voluntary suspension as also an agreement to pay the $10 million fine, Deloitte would implement a set of reforms aimed at helping address conflicts of interest in the consulting industry, according to the DFS.

"The State's agreement with Deloitte will serve as a new model for reforming the financial services consulting industry in New York as well as across the country," New York governor Andrew Cuomo said in a statement.

"When tasked by government agencies to undertake regulatory work at financial institutions, it is critical for these consultants to remain autonomous and avoid conflicts of interest. Our homeowners, investors and economy are protected when independent consultants are truly 'independent'."

In a statement, Deloitte said, "Deloitte FAS has voluntarily entered into an agreement with the New York Department of Financial Services that resolves DFS' inquiry into Deloitte FAS' role in the 2004-2005 Standard Chartered Bank (SCB) matter.

"Deloitte FAS looks forward to working constructively with DFS to establish best practices and procedures that are ultimately intended to become the industry standard for all independent consulting engagements under DFS' supervision."

The statement added that apart from Deloitte FAS, the agreement did not relate to any other Deloitte entity.

According to the state regulator, the case was just the start of a crackdown "investigating and reforming the consulting industry."

According to the Department of Financial Services, Deloitte which was working as a consultant to Standard Chartered, omitted critical information in a report to regulators on its independent review of the bank. The department exercises oversight on New York banks and New York branches of foreign banks.

According to the settlement agreement the regulator found no evidence the consultant intentionally helped or conspired with the bank to launder money. It had said in August that unlawful conduct by Standard Chartered was "apparently aided" by Deloitte.

Benjamin Lawsky, superintendent of the state banking regulator said in a statement, "Today we are taking an important step in helping ensure that consultants are independent voices - rather than beholden to the largest institutions that pay their fees," Lawsky said in a statement. "Our aggressive work investigating and reforming the consulting industry is far from over."