The Board of Governors of the Federal Reserve System ("FRB") announced a $29 million penalty against an international bank for anti-money laundering ("AML") violations.
In an Order to Cease and Desist, the FRB found that Taiwan-based Mega International Commercial Bank Co., Ltd. (the "Bank") had AML deficiencies in its three U.S. branches in Chicago, New York, and San Jose. In particular, the FRB identified issues with risk management and violations of both state and Federal AML laws, rules and regulations, including the Bank Secrecy Act ("BSA").
The Order requires the Bank's board of directors to submit a written plan for improving senior management oversight and building an effective, sustainable framework for BSA/AML compliance. The conditions for the individual branches include, among other requirements, submitting plans for enhanced (i) internal controls, (ii) employee training, (iii) customer due diligence processes and procedures, (iv) suspicious activity monitoring and reporting, and (v) compliance with Office of Foreign Assets Control regulations.
In addition to imposing the fine, the Order requires the Bank's branches to submit periodic progress reports to their applicable Federal Reserve Banks detailing steps taken to comply with the conditions of the Order.
Commentary
This Federal Reserve action is the latest in a series of anti-money laundering enforcement actions by the Federal Reserve and the Department of Justice involving the U.S. operations of non-U.S. banks. Like recent settlements involving Commerzbank, Deutsche Bank, and HSBC, this settlement with Mega International Commercial Bank reiterates three of the U.S. government's expectations under the Bank Secrecy Act. First, any U.S. operation of a non-U.S. bank is expected to conduct due diligence on and monitor the correspondent banking accounts it provides to its own non-U.S. affiliates. Second, each U.S. branch of a non-U.S. bank is expected to have a qualified compliance officer who is supported by adequate staffing levels and resources. Third, the U.S. operations of a non-U.S. bank are expected to have appropriate policies and procedures to identify, investigate, evaluate, and report suspicious activity. A non-U.S. bank with group-wide anti-money laundering policies and procedures should nonetheless determine whether its U.S. operations meet U.S. regulatory expectations.
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