Regulatory actions

Regulatory actions against ABN AMRO
On 19 December 2005, US federal and state bank regulatory agencies, in conjunction with ABN AMRO's home country supervisor, the Dutch Central Bank, jointly issued a consent Cease and Desist Order (the "C&D Order") against the Bank and its branches in New York and Chicago (collectively, the "Branches"). Also on 19 December 2005, the same US federal and state bank regulatory agencies, in conjunction with the US Department of the Treasury, assessed civil monetary penalties against the Bank and the Branches totaling USD 75 mln, and ABN AMRO made a USD 5 mln contribution to a state bank examiners' education fund.

The enforcement actions were undertaken by the Dutch and US regulators due to prior weaknesses in the Bank's and the Branches' anti-money laundering controls and Bank Secrecy Act compliance programme as well as from deficiencies at ABN AMRO's Dubai Branch related to compliance with rules issued by the US Department of the Treasury's Office of Foreign Assets Control.

The C&D Order required the Bank to make improvements to its global compliance and risk management systems to ensure adequate oversight, effective risk management and full compliance with applicable US laws and regulations.

The C&D Order and the action assessing the fines (collectively, the "Orders") are a matter of public record and are available on the website of the Board of Governors of the Federal Reserve System.

The Bank's response
ABN AMRO takes the Orders extremely seriously. Thus, when the Dutch and US federal and state agencies issued the Orders, the Bank issued a statement underscoring the tone from senior-most leaders regarding compliance.

Rijkman Groenink, Chairman of the Managing Board of ABN AMRO, said: "As a global financial organisation, nothing short of the highest standard of compliance is acceptable. We regrettably recognise that, in the past, our compliance in certain areas did not meet this standard. The regulators were right to ask us to correct the deficiencies, and earlier this year we put into place an extensive Remedial Action Programme to address them... Further improving our compliance is the highest priority of the Bank."

Chairman Groenink also stated that he is "personally committed to ensuring that we continue to implement a compliance function within the bank that meets the highest standards in this area and will serve as a benchmark for the entire financial industry."

Strengthening our compliance program
ABN AMRO is actively working with external advisors to fully review the compliance area and ensure the Bank adheres to best-in-class compliance standards in all jurisdictions where it operates. It is vigilantly focused on further developing and maintaining a compliance programme that includes best-in-class policies, procedures and systems infrastructure.

As part of this effort, the following actions are among those that have been taken to enhance the Bank's global compliance programme:

• Centralised the worldwide compliance function.
• Doubled the size of the worldwide Compliance department, adding approximately 300 new jobs.
• Invested substantially in new anti-money laundering and compliance IT systems and procedures.
• The global Head of Compliance reports directly and jointly to the Chairman of the Managing Board and the Vice Chairman of the Supervisory Board to ensure maximum authority and independence.
• Created a Supervisory Board sub-committee to supervise compliance activities globally.

ABN AMRO Mortgage Group, Inc. settlement
On a separate note, on 4 January 2006 ABN AMRO Mortgage Group, Inc. reached a settlement with three US government agencies – the US Department of Justice, the Office of the Comptroller of the Currency, and the US Department of Housing and Urban Development ("HUD") – regarding past actions in connection with Federal Housing Administration ("FHA") insurance certifications administered by the company on approximately 28,000 HUD-insured loans originated during the period 2000 to 2003.

This was a civil settlement with a cash payment in the amount of USD 16.85 mln and represents a final resolution of a matter the mortgage company discovered, investigated and self-reported to the US government in 2003.

ABN AMRO Mortgage Group, Inc. is committed to an FHA loan programme that is in full compliance with all of the applicable requirements. The company remains steadfast in monitoring its improved controls, and does not and will not tolerate misconduct.

ABN AMRO Mortgage Group, Inc.'s settlement with the three US agencies is publicly available on the HUD website.

Compliance with the orders
The Bank and the Branches timely filed multiple submissions required by the Orders with the Dutch and US regulators. The Bank will adhere rigorously to all provisions of the Orders in order to remain in full compliance with them.

ABN AMRO recognises the significance of these matters to its valued clients, and wishes to assure them of its full focus on these matters and its full cooperation with all governmental authorities. Further, the Bank recognises that compliance is its top priority, and the Bank is committed to fully addressing past deficiencies and creating a world-class compliance programme consistent with the global banking industry's highest standards.