Banking advisers drawing scrutiny

They are known as Wall Street’s shadow regulators. And after years of guiding banks through problems like money laundering and foreclosure abuses, their influence has soared.

Now, regulatory scrutiny of the consulting industry itself is intensifying.

New York state has subpoenaed two consulting firms as part of a broader investigation into the industry’s perceived coziness with Wall Street, according to people briefed on the inquiry.


The two firms, which received the subpoenas in recent months — Promontory Financial Group and PricewaterhouseCoopers — are among the industry’s biggest names.

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The subpoenas by the New York regulator presents the latest threat to the consulting industry, which is being faulted for inadequately handling recent bank regulatory problems. In another sign that the industry’s clout is in jeopardy, federal regulators are rethinking their own reliance on consultants, which are often called in to bolster compliance procedures at banks.

PricewaterhouseCoopers declined to comment on the subpoena. Promontory also declined to address it, but a spokesman acknowledged that the firm “from time to time receives document requests in the form of subpoenas related to client activities.”

The spokesman, Christopher Winans, added, “Promontory does not disclose the nature of individual requests or scope of inquiry.”

Neither firm has been accused of wrongdoing, and New York has not indicated that it will penalize the firms. Time magazine earlier reported online that Promontory had received a subpoena.


In the past, the consulting industry defended the independence of its work. Conflicts of interest, however, were a central issue when New York took action against another seasoned consultant, Deloitte.

New York’s financial regulator, Benjamin M. Lawsky, fined Deloitte $10 million in June and banned it from advising banks in New York for one year after accusing the firm of watering down a report about money-laundering controls at the British bank Standard Chartered.

Lawsky is scrutinizing some of the same issues in his investigation of Promontory and PricewaterhouseCoopers, according to the people briefed on the matter.

The subpoena of Promontory seeks e-mails and other documents generated during the firm’s work for Standard Chartered, which settled with New York and federal regulators over claims that it had illegally transferred money for Iran.

Lawsky is also examining Promontory’s work for another bank suspected of transferring money for countries blacklisted from doing business in the United States. The identity of the other bank was unknown.


“We were not retained to characterize the transactions or interpret their legal meaning,” Winans, the Promontory spokesman, said.

In Lawsky’s examination of PricewaterhouseCoopers, he is focused on the consultant’s work for the Bank of Tokyo-Mitsubishi UFJ, which faced investigations over foreign money transfers, according to people briefed on the matter. PricewaterhouseCoopers was tasked with assessing the volume of transfers.

Both firms came under the spotlight for their work in reviewing foreclosure abuses at banks. Consultants racked up more than $2 billion in fees while struggling to complete the assignment.