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From Banking and Finance Law Daily, November 7, 2016

Agricultural Bank of China fined $215M by New York regulator

By J. Preston Carter, J.D., LL.M.

Agricultural Bank of China will pay a $215 million penalty and install an independent monitor for violating New York’s anti-money laundering laws, under a consent order entered into with the New York Department of Financial Services. According to its press release, a DFS investigation discovered intentional wrongdoing, including actions by bank officials to obfuscate U.S. dollar transactions conducted through the New York branch that might reveal violations of sanctions or anti-money laundering laws.

The bank also silenced and severely curtailed the independence of the Chief Compliance Officer at the New York branch, who tried to raise serious concerns to branch management and conduct internal investigations regarding suspicious activity, leading to the officer’s resignation. The CCO suspected the bank of sending coded messages through the Society of Worldwide Interbank Financial Telecommunication (SWIFT) system that masked the true parties to a transaction and avoided screening by the DFS.

"DFS will take swift and appropriate action when our investigation finds egregious conduct and intentional circumvention of a regulated bank’s compliance program," said Financial Services Superintendent Maria T. Vullo. "The failure of a strong compliance program at the New York Branch of the Agricultural Bank of China created a substantial risk that terrorist groups, parties from sanctioned nations, and other criminals could have used the Bank to support their illicit activities."

Consent order. Under the consent order, the bank will retain and install an independent monitor within 60 days of its selection by DFS for two years to conduct a comprehensive review of the effectiveness of the branch’s program for compliance with the Bank Secrecy Act/Anti-Money Laundering requirements and the state laws and regulations. The Independent Monitor will also conduct a review of the New York branch’s U.S. dollar clearing transaction activity from May 1, 2014, through Oct. 31, 2015, which could result in additional enforcement action.

Federal action. The bank and its branch recently entered into a cease and desist order with the Federal Reserve Board to address significant deficiencies in the branch’s risk management program and compliance with applicable federal and state laws, rules, and regulations relating to BSA/AML compliance (see Banking and Finance Law DailySept. 29, 2016).

NY AML reg. The DFS release said its action highlights the importance of its new risk-based anti-terrorism and anti-money laundering regulation that requires regulated institutions to maintain programs to monitor and filter transactions for potential BSA/AML violations and prevent transactions with sanctioned entities. The regulation, which takes effect on Jan. 1, 2017, requires regulated institutions to submit an annual board resolution or senior officer compliance finding confirming the steps taken to ascertain compliance with the regulation.

Companies: Agricultural Bank of China; Agricultural Bank of China New York Branch

MainStory: TopStory BankSecrecyAct BankingOperations EnforcementActions NewYorkNews StateBankingLaws

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