Promontory Financial Group vowed Monday to take the New York Department of Financial Services to court after the department effectively banned the consulting firm from working on regulatory issues with the banks the department supervises.

Promontory, founded by former Comptroller of the Currency Eugene Ludwig, helped London-based Standard Chartered whitewash reports on money laundering it submitted to the regulator in 2010 and 2011, the department said in a report issued Monday. The regulator in 2012 fined Standard Chartered $640 million for allowing about $250 billion of transactions for countries under sanction by the government.

The department had been investigating whether Promontory had helped the bank conceal or minimize the scale of its wrongdoing, as reported last month in The New York Times and elsewhere.

In its report on that investigation, the department said it had identified "numerous instances" in which Promontory "made changes to 'soften' and 'tone down' the language used in its reports, avoid additional questions from regulators, omit red flag terms or otherwise make the reports more favorable to the bank."

As a result the department plans to deny the consultant access to confidential bank supervisory information — effectively preventing it from working with bank clients on regulatory matters — "until further notice."

The ban would apply to regulatory-advisory work with all banks that the department supervises: New York State-chartered banks and foreign banks headquartered in New York.

Promontory defended its work and said it plans to fight the punishment, which it called a "regulatory overreach." It will seek a stay of the department's action in the New York State Supreme Court, the consultancy said in a press release.

"We stand behind the integrity of our professionals and the quality of our work, the accuracy of which the order does not dispute," the release said.

The department, formerly headed by Benjamin Lawsky and now by interim Superintendent Anthony Albanese, has also punished the consultants Deloitte and PriceWaterhouseCooper for lacking independence in their work for banks, but the move against Promontory is the harshest punishment it has doled out so far against a consultant.

In a letter last week to Albanese obtained by American Banker, Promontory's lawyers suggested the New York department had a conflict of interest in pursuing the firm, since former superintendent Lawsky is starting a competing consulting shop.

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