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. Last Updated: 07/27/2016

Bank of New York to Pay $38M in Penalties

NEW YORK -- The Bank of New York Co. on Tuesday agreed to pay $38 million in penalties to resolve a long-running U.S. government investigation into a Russian money-laundering conspiracy that moved billions of dollars through its accounts.

The U.S. attorneys for the Eastern and Southern districts of New York said that, as part of the agreement, they would not prosecute the Bank of New York, one of the oldest U.S. financial institutions and the main unit of the Bank of New York Co.

The bank "has admitted its criminal conduct" and will forfeit $26 million to the government and pay $12 million in restitution to banks that lost money through the company's misconduct, the U.S. attorneys said.

The bank also has agreed to internal reforms, to be monitored by an independent examiner for three years and to continue to cooperate with the government investigations.

The company said it had previously set aside funds to cover the financial penalties.

"We are satisfied that reaching this agreement is in the best interest of our company and all of our constituents," chairman and chief executive Thomas Renyi said in a statement. He said the terms of the agreement "will not impede our ability to pursue our business strategies and grow the company."

The Bank of New York was founded in 1784 and is one of the oldest U.S. financial institutions.

The money-laundering investigation began in 1998 and was conducted by the U.S. attorneys in New York, the FBI and the IRS. The probe surrounded accounts once controlled by former Bank of New York executive Lucy Edwards, her husband, Peter Berlin and others.

In February 2000, Edwards and Berlin pleaded guilty in Manhattan federal court to charges they were part of a scheme that moved $7 billion through accounts at the bank and to helping two Russian banks conduct illegal activities in the United States.

Money laundering occurs when illegally obtained profits are funneled through a series of businesses and banks to disguise the funds' origins and make the profits appear legitimate.

In admitting responsibility, the Bank of New York "acknowledged, among other things, that it failed to have an effective anti-money-laundering program, that it intentionally failed to take steps to report known evidence of suspected criminal conduct by a bank customer and BNY employees," the government said in its announcement.

Bank of New York Co. shares were little changed in afternoon trading, down 12 cents at $31.50.