ABN AMRO - Money Laundering Investigation Threatens The Dividend

ABN (OTCPK: ABNRY) has disclosed that it is under investigation by Dutch prosecutors for potential breaches of anti-money laundering and terrorist financing laws. The press release (here) was brief merely saying that:
On Wednesday 25 September 2019, the Dutch public prosecutor informed ABN AMRO that the bank is the subject of an investigation relating to requirements under the Act on the prevention of money laundering and financing of terrorism. ABN AMRO will cooperate fully with the investigation.
This marks a significant escalation of a case that first came to light in August when ABN said it could face fines over failures in client oversight. The shares dropped as much as 12% on the news.
The potential for a large fine underscores the risks to the ABN dividend story that I outlined in a recent article, whose title "ABN AMRO - 8% Yield Is A Warning Signal, Not A Buying Signal" has turned out to be more prescient than I expected.
Share price drop reflects fears of a multi-billion fine
With the shares dropping as much as €2 on the news, the implied size of the fine the market seems to think is possible is in the region of €2bn. This is on the higher side relative to the €775m ING (NYSE: ING) was fined last year in a similar case. However, ING had also been previously fined $619m in 2012 by US authorities for related transgressions, so it is possible the market is trying to price in the additional cost of potential US penalties for ABN, albeit there is no... Read more

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