Israel Discount Bank (TASE: DSCT) has unveiled the procedural failings at its US subsidiary Israel Discount Bank of New York that resulted in $2.2 billion being laundered through the bank. The bank said it had already begun to address and rectify the weaknesses that had come to light. The factors noted by the bank in its report were as follows:
- Failure to conduct due diligence audits as defined by the COSO commission on fraudulent financial reporting.
- Inadequate skill on the part of the accounting team in applying GAAP.
- Policies and procedures that proved ineffective in the preparation and review of account reconciliation and analysis.
- Policies, procedures and manpower that lacked the necessary competence to ensure delivery of timely and precise financial statements.
Discount Bank New York’s accountants added, however, that the weaknesses that had been identified did not affect their unqualified opinion regarding the financial reports for the year ended December 31, 2005.
The affair came to light after an inquiry by the New York State Department of Banking found that during 2000-2005, $2.2 billion was laundered through Discount Bank New York, in addition to failings in the efficacy of the bank’s monitoring and reporting on money laundering issues.
Under an arrangement reached with US banking enforcement authorities, Discount Bank New York paid $8.5 million to the State of New York to cover the costs of the inquiry. It will also pay a fine of up to $16.5 million to the New York State Department of Banking and the US Federal Reserve Board.
Discount Bank New York general manager Arie Sheer stepped down from his post following the affair. He has been replaced by Discount Bank executive VP banking division Reuven Spiegel.
Published by Globes [online], Israel business news - www.globes.co.il - on July 5, 2006
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