In Crackdown on Bank Consultants, Deloitte Is Fined and Banned

Deloitte has agreed to a $10 million fine and a one-year ban from advising banks chartered in New York as part of a settlement with state officials, Gov. Andrew M. Cuomo’s administration announced on Tuesday.

The move, a stunning blow to the consulting arm of the accounting giant, stemmed from what state authorities called “misconduct, violations of law, and lack of autonomy” during its work for Standard Chartered, a British bank accused of illicitly transferring billions of dollars on behalf of Iran. Although the bank hired Deloitte to spot suspicious money transfers routed through its New York branches, state authorities said, the consultant instead helped the bank escape regulatory scrutiny.

In August, Standard Chartered agreed to pay New York’s top banking regulator, Benjamin M. Lawsky, $340 million to settle the claims. But until now, Deloitte was not formally accused of wrongdoing.

The agreement on Tuesday â€" including the fine, the one-year ban and a mandatory “code of conduct” that forces the consultant to ensure the independence of its work â€" is a victory for Mr. Lawsky and the latest blow to the multibillion-dollar consulting industry.

The business, which includes some of the world’s largest accounting firms, has become something of a shadow regulator of Wall Street. Regulators, grappling with scarce resources, rely on consultants to address weaknesses at banks that are hit with federal enforcement actions.

But in recent months, consulting firms have been faulted for inadequately handling several prominent bank regulatory problems. In the wake of a botched review of millions of home foreclosures nationwide, for example, lawmakers and regulators came to question the independence of the consultants. The firms, critics note, are paid and handpicked by the same banks they are expected to help reform.

“At times, the consulting industry has been infected by an ‘I’ll scratch your back if you scratch mine’ culture and a stunning lack of independence,” Mr. Lawsky said in a statement on Tuesday. “Today, we are taking an important step in helping ensure that consultants are independent voices - rather than beholden to the large institutions that pay their fees.”

Mr. Lawsky’s action against Deloitte is the first salvo in a broader crackdown on the consulting industry. His office, seeking to rein in the use of consultants, has seized on an obscure state banking law to weed out consultants with spotty track records, these people said.

Under the law, which dates back to the turn of the 20th century, Mr. Lawsky’s office controls access to regulatory documents that consultants need to review when advising a bank. Mr. Lawsky is now planning to choke off access to firms that fail to meet a set of standards.

“The state’s agreement with Deloitte will serve as a new model for reforming the financial services consulting industry in New York as well as across the country,” Governor Cuomo said in the statement.

A Deloitte spokesman could not immediately be reached for comment. But in a statement on Monday, the spokesman said: “We share an important common goal with regulators â€" to safeguard the integrity of the capital markets. We welcome their insights into ways that we and others can improve our processes and procedures.”