Sun, Dec 14, 2014

Commerzbank AG's expected settlement with authorities over alleged violations of U.S. sanctions and anti-money laundering laws is likely to exceed $1 billion in penalties, according to a person familiar with the probes.

The settlement is still being negotiated, and a deal before the end of the year is unlikely, two sources said.

Margarita Thiel, a spokeswoman for Commerzbank, Germany's second-largest lender, declined to comment.

Commerzbank was close to an agreement in September with U.S. prosecutors and regulators over its dealings with Iran and other countries subject to U.S. sanctions, Reuters has reported, citing sources.

The sanctions settlement had been expected to cost the bank about $650 million, according to sources, and the bank had been expected to enter into deferred prosecution agreements that would have suspended criminal charges.

But that accord was put on hold after the U.S. Attorney's office in Manhattan looked into the bank's records in connection with the massive accounting fraud at Japan's Olympus Corp , Reuters has reported.

If the Olympus-related probe of the bank's allegedly poor anti-money laundering controls is included in the settlement, it was expected to raise the cost to Commerzbank above $650 million.

A settlement of more than $1 billion would include penalties sought by the U.S. Department of Justice, the U.S. Attorney in Manhattan, New York state's Department of Financial Services and the Manhattan District Attorney's office, one source said.

Officials of all four agencies declined comment.

The U.S. Attorney's office in Manhattan would not be alone in seeking a penalty related to the Olympus-related anti-money laundering probe, one source said.

The fine sought by New York's Department of Financial Services, which regulates Commerzbank in the state, could also be higher due to its alleged Olympus-related conduct, the source said.

The state regulator was expected to get about half the bank's anticipated $650 million penalty over the sanctions-related violations, Reuters has reported.

The $1.7 billion Olympus fraud is considered one of the biggest corporate scandals in Japan's history. In 2011, the camera and medical equipment maker admitted it used improper accounting to conceal massive investment losses over more than a decade and restated years of financial results.

Commerzbank handled hundreds of millions of dollars of transactions connected to the fraud, according to court filings.

The Financial Times first reported on Thursday that the bank was in talks to pay more than $1 billion to U.S. authorities.