RBS didn't look like a laundromat to regulators, who fined the U.K. bank $100 million for laundering money for countries such as Iran. Photographer: Simon Dawson/Bloomberg
RBS didn't look like a laundromat to regulators, who fined the U.K. bank $100 million for laundering money for countries such as Iran. Photographer: Simon Dawson/Bloomberg

Back in 1999, after the notorious con man Martin Frankel went missing, federal agents found a partially burned to-do list at his mansion in Greenwich, Connecticut. Item No. 1 on the list: "Launder money."

Royal Bank of Scotland Group Plc might not have topped that one, but it came close enough to win this year's "Dumbest Bank of the Year" award. OK, that's not a real award, but it should be.

RBS, which is still government-controlled more than five years after taking a U.K. taxpayer bailout, will pay $100 million to federal and state banking regulators as punishment for using U.S. correspondent banks to conduct transactions with customers in Iran, Sudan and other countries subject to international sanctions. Often, violations of the law are difficult for banking regulators to establish, because the evidence tends to be gray and open to interpretation. That doesn't seem to have been a problem in this instance.

According to a consent order released today by the New York State Department of Financial Services, RBS provided employees at its payment-processing centers in the U.K. with written instructions, containing "a step by step guide on how to create and route U.S. dollar payment messages involving sanctioned entities through the United States to avoid detection."

Those instructions included this:

"IMPORTANT: FOR ALL US DOLLAR PAYMENTS TO A COUNTRY SUBJECT TO US SANCTIONS, A PAYMENT MESSAGE CANNOT CONTAIN ANY OF THE FOLLOWING: 1. The sanctioned country name. 2. Any name designated on the Office of Foreign Asset Control (OFAC) restricted list, which can encompass a bank name, remitter or beneficiary."

In other words, RBS explicitly told employees how to cover the bank's tracks. The consent order said the bank conducted $523 million of transactions from 2002 to 2011 through New York correspondent banks involving Sudanese and Iranian customers. It also said that RBS, to a lesser extent, processed U.S. dollar transactions for clients in Cuba, Burma and Libya.

After a dumb note like that, it's no wonder RBS did the smart thing and settled.

(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)