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N.Y. official vows more oversight of bank consultants

The Department of Finan-cial Services investigated Deloitte and the Standard Chartered Bank.Bobby Yip/Reuters/File 2010

ALBANY, N.Y. — New York’s top financial regulator has promised more oversight of bank consultants, including large accounting firms, citing an old, ignored state law that gives his office “the power to drive reform.”

Addressing a conference on corporate responsibility this week in Binghamton, Superintendent of Financial Services Benjamin Lawsky said consultants are hired by banks to straighten out problems, but can be conflicted taking tough stands with the clients who pay them.

“What we realized as we were starting to look not only at Standard Chartered but at other banks who have especially anti-money-laundering problems, what we realized is consultants they were hiring to try and clean this up and to try and expose what went wrong were often almost as compromised as the banks themselves,” Lawsky said.


They found nobody was regulating the consultants, but he said Department of Financial Services lawyers unearthed a century-old New York banking statute that requires department approval for consultants to access confidential bank information.

“We held the keys to the kingdom as to whether the consultant could go in and work at particular banks. We held the power to drive reform in the industry,” he said.

Other regulators around the country can probably do the same for the banks they oversee, he said.

In June, the department used that provision in a settlement with Deloitte Financial Advisory Services to pay $10 million and cease new consulting for one year at state-regulated banks to settle an investigation into its work for the New York branch of Standard Chartered Bank in 2004 and 2005.

The company said it entered the agreement voluntarily and would work with the state’s regulators to establish best practices.

The same month, the Bank of Tokyo Mitsubishi-UFJ Ltd. agreed in another Department of Financial Services settlement to pay $250 million to the state for laundering billions of dollars in transactions that violated economic sanctions against countries including Iran, Sudan, and Myanmar.


Lawsky publicly outlined the law his office can use in enforcement strategy toward consultants a few days later at an American Bar Association forum in Manhattan.

The department has declined to publicly identify other consultants under investigation.