By Karen Freifeld
NEW YORK, Sept 13 (Reuters) - New York state's banking regulator subpoenaed PricewaterhouseCoopers (PwC) and Promontory Financial Group as part of an effort to reform the consulting industry, according to people familiar with the matter.
The subpoenas, issued by the New York State Department of Financial Services, are part of a probe of the independence of consultants retained by banks, often at the behest of regulators.
State and federal authorities have increased scrutiny of the financial services consulting industry since the firms were hired to review foreclosure abuses in 2011 and billed more than $2 billion before regulators canceled the project.
The probe of PwC focuses on its work for Bank of Tokyo-Mitsubishi UFJ, according to the people with knowledge of the matter, who were not authorized to speak publicly.
In June, Bank of Tokyo-Mitsubishi agreed to pay New York state $250 million for deleting information from $100 billion in wire transfers that authorities could have used to police transactions with sanctioned countries like Iran.
PwC consulted on a review of the transactions and over the course of the summer turned over to New York documents related to that review, according to one of the sources.
The investigation is ongoing, that source said.
A PwC spokeswoman declined comment.
Promontory is being probed in connection with its work for British-based Standard Bank and another bank, the source said. The source would not identify the second bank.
Promontory did a review of Standard Chartered's improper transactions, the source said.
"Promontory from time to time receives document requests in the form of subpoenas relating to client activities," company spokeswoman Debra Cope said in an email. "Promontory does not disclose the nature of individual requests or scope of the inquiry."
Last year, Standard Chartered agreed to pay $340 million to New York over transactions linked to Iran and other sanctioned countries.
Deloitte LLP's financial advisory unit, which also did consulting work for the bank, settled with New York in June.
New York had accused Deloitte of omitting key information in a report to regulators after reviewing Standard Chartered's operations.
Deloitte agreed to pay $10 million and refrain from new business with New York-regulated banks for a year. It also agreed to a code of conduct designed to end potential conflicts of interest.
The state said the code of conduct would govern other consultants who seek work that must be approved by the department and it would serve as a model for reforming the consulting industry.