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Management at Israel Discount Bank breathed a sigh of relief Friday, on news that the American authorities' investigation into money laundering activities by subsidiary IDB New York were over.

After three and a half years of suspicions and restrictions, and a process to correct faulty procedures and oversights, the bank can go back to business as usual. It may, if it chooses, buy or merge with another bank, or introduce structural changes - three activities that were off-limits during the investigation.

The affair began in late 2005, when New York's state prosecution reported that over the previous five years, IDB New York had facilitated the transfer of $2.5 billion from accounts in Brazil via its New York offices.

A probe by the American authorities revealed that some of the bank's clients had been exchanging Brazilian money for dollars at moneychangers in Brazil who were unauthorized to transfer funds internationally. The money changers had accounts at IDB New York, where they deposited funds, which the bank put into the private accounts of its clients, who then ordered the money transferred elsewhere. This process bypassed Brazil's currency supervision and was therefore illegal.

In addition, the transfers violated American laws - both New York bank supervision directives and anti-money laundering laws. IDB New York had not obtained the required information on its clients, in violation of state and federal laws, and had done nothing to prevent the use of its accounts for illegal fund transfers. The bank also failed to meet American requirements for objective reporting in cases of suspicious transactions.

The tight supervision of the bank, after the investigation was launched, cost Discount dearly. The cost of improving internal auditing and procedures, plus legal counseling, totaled $50 million, on top of the $25 million fine.

Bank officials are happy the affair is over.

"We harnessed the process, which was initially imposed on us, to totally reorganize the bank," said Discount Chairman Shlomo Zohar. "This change is now evident in the improvement in the bank's management, business capability, risk management, improved relationship with American supervisory authorities and the preparation of a foundation for future development. The effort was difficult, but worthwhile."

"The authority's announcement ends a long period of intensive work and marks the beginning of a new period of business development and growth," said Reuven Spiegel, CEO at IDB New York. "IDB New York is the biggest Israeli bank in the U.S. This decision will make IDB New York more competitive and increase its contribution to the group."