A massive investigation into potential money laundering at Bank of New York Co. was not expected to affect the company's operations, but some analysts said the matter may point to a breakdown in internal controls.

Bank of New York confirmed Thursday that federal authorities have been investigating thousands of transactions at the $67.8 billion-asset banking company.

According to an extensive report in Thursday's New York Times, up to $10 billion may have passed through a series of accounts with possible links to Russian organized crime.

Bank of New York issued a statement Thursday saying it is cooperating with the U.S. Attorney's Office in New York. The company added that no customer or bank funds have been lost and that there have been no allegations of wrongdoing against the company.

A spokesman for the U.S. Attorney's office declined to comment.

Market watchers said it was unclear when the company was alerted to potential money laundering activities but that the apparent magnitude of the scheme should have sounded alarms. "It raises the question of whether there were lax controls," said George Bicher, an analyst at Deutsche Bank Alex. Brown. "Maybe they need to do things differently."

Bank of New York, the nation's 17th-largest banking company, has a reputation for being extremely conservative in its operations, with a corporate culture to match.

The banking company said two employees are "on leave" pending the outcome of the investigation. The Times identified those individuals as Natasha Gurfinkel Kagalovsky and Lucy Edwards, who are both married to Russian businessmen.

Analysts said Bank of New York has been very aggressive courting business in Russia since the breakup of the Soviet Union. It has a virtual lock on the market for Russian companies seeking American Depositary Receipts, or ADRs, the certificates in which foreign company shares trade in U.S. markets.

The buildup of relationships with Russian corporate clients "was largely because of those two women," said Lawrence Cohn, an analyst at Ryan, Beck & Co., referring to Ms. Kagalovsky and Ms. Edwards. "I always thought it was a legitimate business."

Fraud prevention at big banking companies is an increasing concern. Three years ago, Citicorp found itself tangled up in an a money laundering investigation involving its private bank and Raul Salinas de Gortari, the brother of the former president of Mexico.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.