A more than year-long DFS investigation uncovered that PwC – under pressure from BTMU executives – improperly altered an “historical transaction review” (HTR) report submitted to regulators on wire transfers that the Bank performed on behalf of sanctioned countries and entities. During the 11th month (May 2008) of a 12-month engagement (June 2007 to June 2008), PwC found that BTMU had issued special instructions to Bank employees to strip wire messages of information that would have triggered sanctions compliance alerts – after the Bank denied having such a policy only weeks before in a meeting with regulators. PwC understood that this improper data manipulation could significantly compromise the HTR’s integrity and PwC inserted into an earlier draft of the report an express acknowledgement informing regulators that “had PwC know[n] about these special instructions at the initial Phase of the HTR then we would have used a different approach in completing this project.” Specifically, PwC would have conducted a more in-depth, forensic investigation into the Bank’s scheme – rather than simply a more rote, mechanical review of the transactions provided to it by the Bank. In other words, the discovery of the Bank’s scheme to falsify wire transfer information cast doubts on whether PwC had a complete set of data to review (among other issues).
However, at the Bank’s request, PwC ultimately removed the original warning language from the final HTR Report the Bank submitted to regulators and, in fact, inserted a passage stating the exact opposite conclusion: “[W]e have concluded that the written instructions would not have impacted the completeness of the data available for the HTR and our methodology to process and search the HTR data was appropriate.” Moreover, also at the Bank’s request, PwC removed other key information from drafts of the HTR Report, including:
- deleting the English translation of BTMU’s wire stripping instructions, which referenced the Bank doing business with “enemy countries” of the U.S;
- deleting a regulatory term of art that PwC used throughout the report in describing BTMU’s wire-stripping instructions (“Special Instruction”) and replacing it with a nondescript reference that lacked regulatory significance (“Written Instruction”);
- deleting most of PwC’s discussion of BTMU’s wire-stripping activities;
- deleting information concerning BTMU’s potential misuse of OFAC screening software in connection with its wire-stripping activities;
- deleting several forensic questions that PwC identified as necessary for consideration in connection with the HTR Report; and
- deleting a section of the HTR Report that discussed the appearance of special characters (such as “#” “-” and “,”) in wire transfer messages, which disabled PwC’s filtering system from detecting at least several transactions involving Sudan and Myanmar. (e.g. SUD#AN).
