This month’s key regulatory and compliance-related developments in private banking and wealth management.
RBS agrees $4.9bn settlement over RMBS misconduct charges
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Royal Bank of Scotland (RBS) has agreed to pay $4.9bn to settle charges by the US Justice Department (DOJ) of misleading investors on residential mortgage-backed securities (RMBSs) in the run-up to the financial crisis.
The fine is said to be the largest ever imposed on a single entity for wrongdoings during the period of the crisis. US attorney for the district of Massachusetts Andrew Lelling said: “This resolution – the largest of its kind – holds RBS accountable for defrauding the people and institutions that form the backbone of our investing community.”
According to the DOJ, RBS misled investors in the underwriting and issuing of RMBSs from 2005 and 2008 by concealing problems with originators’ loan underwriting, changing due diligence findings to keep high-risk loans from its RMBSs, and offering inaccurate loan data to investors.
RBS used RMBSs to shift the risk of faulty loans and tens of billions of dollars in losses to investors, the DOJ said. The bank earned “hundreds of millions of dollars” through the scheme, added the DOJ, although the bank has not admitted to misconduct.
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By GlobalDataCristiano Ronaldo to pay nearly €19m to Spanish taxman
Spanish tax authorities have approved a tax dispute resolution with Portuguese footballer Cristiano Ronaldo, requiring him to pay nearly €19m ($22.2m).
Ronaldo, who played for Spanish club Real Madrid until the end of the 20172018 football season, was fined €3.2m and sentenced to 24 months in prison, which he is unlikely to serve.
According to Spanish legislation, any sentence of two years or lower for financial crimes can be served in probation. Under the settlement with the Spanish authorities, Ronaldo will pay €5.7m in taxes, €1m in accrued interest and €250 daily for 48 months to cover the prison sentence, alongside the fine of €3.2m.
Overall, the total amount is estimated at around €19m. Ronaldo was accused of four counts of tax fraud between 2011 and 2014, valuing €14.7m. The Spanish prosecutor accused the Portuguese player of using offshore companies to conceal additional income.
However, Ronaldo denied any wrongdoing when questioned by the court in July last year, reported Si.com. In 2016, another footballer, Lionel Messi, who plays for Spanish club Barcelona, was convicted on similar grounds of not divulging all his advertising contracts.
China eases foreign ownership limits for banks and asset managers
Chinese foreign ownership limits have been waived by removing holding limits in domestic financial entities including banks and asset management companies, in a bid to open up the sector further.
Holdings were previously restricted to 20% for a single institution, and 25% for group of investors. According to Bloomberg, the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement that all foreign companies are now regarded as local institutions.
The new policies were implemented following a public consultation period that ended in July. The commission also abolished a 15-year investment management document on foreign investment.
China is currently pursing multiple initiatives to open up its financial sector as its trade war with the US escalates, including reducing restrictions on foreign investors to encourage investment in equity and bond markets.
The decision to scrap limits on foreign holdings is expected to directly benefit major international financial giants such as Nomura and JPMorgan which are reportedly planning to establish joint ventures in China.
At the end of 2016, foreign banks had $420.1bn in assets in the country, representing around 1.3% of the total, according to CBIRC data.
ZKB to pay $98.5m to settle US tax evasion probe
Zuercher Kantonalbank (ZKB), a Swiss cantonal bank, has agreed to pay $98.5m to the US Department of Justice (DOJ) to resolve allegations of helping US clients dodge tax obligations through undeclared bank accounts.
The settlement ends a seven-year probe, which found that the bank had helped US clients to evade taxes, file false federal tax returns with the IRS, and hide accounts from the IRS.
According to the DOJ, ZKB managed around 2,000 undeclared accounts between 2002 and 2013 for US customers, who dodged over $39m in taxes. Two ZKB bankers, Stephan Fellmann and Christof Reist, also pleaded guilty in the case.
The bank co-operated with the case, but discouraged the bankers from co-operating with the US authorities. Manhattan US attorney Geoffrey Berman said: “ZKB and two of its bankers have admitted to conspiring to assist US taxpayers in evading their tax obligations. The bank enabled taxpayers to hide accounts from the IRS and actively sought to win the business of Americans looking to evade taxes.”
The Swiss bank has now agreed to assist the DOJ by offering detailed information about accounts in which US clients have a direct or indirect interest, and co-operate with prosecutors in making treaty requests for data on accounts. The bank said the settlement will not affect its 2018 financial results.
