The Swiss bank and newly-minted CEO Ralph Hamers want to sweat out a Dutch money laundering scandal. A look inside court documents provides an unflattering picture of his role and responsibility at ING at the time.
A summary of an appeals court decision (in Dutch) in The Hague that paved the way for UBS CEO Ralph Hamers to be investigated contains several potential smoking guns. The court ruled it wasn't plausible that the Dutch executive hadn't had any indication or warnings of the massive money laundering scandal brewing while he was running ING.
Six weeks into his tenure, the Swiss bank is grappling with the fallout from its new CEO's past: ING in 2018 paid 775 million euro ($938 million) to settle with authorities. The deal didn't include sanctions against any executives or other individuals, but a Dutch activist is seeking to change that – and won a victory this week by putting Hamers squarely in the crosshairs.
Hamers as well as the bank appear to be trying to sweat it out until Holland's prosecutor decides whether to formally open criminal proceedings against him. It notes that the court in The Hague didn't reveal or submit new evidence or developments in the case, which examines a roughly ten-year stretch until 2018.
Incomplete Files, Dodgy Clients
That isn't entirely true: the court documents reveal details of ING's inner workings at the time that haven't been widely reported. In 2014, for example, Hamers was warned by ING's legal chief at the time of structural deficiencies in the bank's second line of defense, its compliance department. The CEO was urged to act immediately or the loopholes would «represent a huge risk of criminal prosecution not only for ING but also for members of top management.»
Hamers was ostensibly warned via monthly updates by ING's legal department and internal audit of the compliance gaps: client files were incomplete, risk valuations were faulty, relationships with dodgy clients were severed too late or not at all, and supervision inside didn't work effectively. Compliance overseers were overworked, too thinly staffed, and unequipped to cope with the deluge.
ECB's Repeated Warnings
The issue got real for ING in 2015 with an inspection report from the European Central Bank which established various deficiencies in ING's compliance as well. Hamers had told Dutch investigators that he had known of the ECB's missive, but saw no reason to act on it as long as discussions with the central bank were ongoing.
The court ruling found that Hamers was «repeatedly» made aware of the compliance issues by the European overseer, as well as potential criminal wrong-doing. The same year, ING's home regulator De Nederlandsche Bank fined the lender for failing to follow enforce adequate checks and controls to prevent money laundering and terror-linked money from flowing through the system. ING was aware of the threat that its account might be being used for illegal transactions, DNB noted.
CEO's Failure To Recall
Hamers maintains not to recall the ECB's warnings at the time. By contrast, deputies including finance chief Koos Timmermans and domestic boss Nick Jue do appear to have been in the picture about the warnings. Timmermans stepped down over the affair in 2018.
The court in The Hague hasn't made the correspondence between ING and the various regulatory bodies public yet. The activist seeking an indictment for Hamers, Pieter Lakeman, maintains they may illustrate that Hamers was also in the picture about the holes in ING's compliance apparatus.
Appeals Court Vs Criminal
The appeals court leaves little doubt on this point, concluding that ING's management knew of the damaging deficiencies. As CEO, Hamers was required to take remedial measures, but failed to do so, the court found. ING eschewed hiring more compliance officers and executives for spending reasons, and in doing so Hamers tacitly accepted that the bank might be used for illegal transactions.
The court also emphasized that this doesn't legally and conclusively prove that Hamers committed a crime – that is for a criminal court to decide, should the CEO be indicted.
Shift In Tone
The preliminary criminal probe represents a major setback for Hamers in his job, as well as for the Swiss bank. Chairman Axel Weber immediately backed Hamers as CEO following the ruling, but the matter is a stumbling block for the 54-year-old's efforts to digitally revitalize UBS.
The tone taken by the court in The Hague should unsettle Hamers as well as UBS: it criticized the Dutch banker for his behavior in the 2018 case, claiming he had failed to take responsibility, and had sent a lawyer to hearings and questionings. The court admitted it isn't deaf to popular sentiment and debate over ING's settlement and the lack of accountability for top management.
