Update | Top China bank fined US$215 million over money laundering violations in New York
Agricultural Bank of China Ltd will pay a US$215 million penalty for violating New York’s anti-money laundering laws and ordered the Beijing-based lender to install an independent monitor, in a rare U.S. penalty against one of China’s largest state-run banks,the state’s financial regulator said on Friday.
Bank officials engaged in “intentional wrongdoing,” including masking suspicious transactions at the New York branch, the New York State Department of Financial Services (DFS) said. The bank also “silenced” the branch’s chief compliance officer, the regulator said.
The DFS said China’s No. 3 lender willfully covered up information that might have impeded its US dollar-clearing transactions for clients in China and Russia and omitted information regarding dollar transactions with sanctioned counterparties.
According to the DFS, the New York branch of AgBank ramped up its dollar-clearing activities through foreign correspondent accounts starting in 2013, even though the regulator had warned the bank not to increase those transactions until it significantly upgraded its internal compliance programme.
DFS superintendent Maria Vullo, announcing the action on Friday, cited “egregious conduct and intentional circumvention” of the bank’s compliance programme.
The bank’s conduct, she added, “created a substantial risk that terrorist groups, parties from sanctioned nations and other criminals could have used the bank to support their illicit activities.”
The bank’s chief compliance officer in New York and other compliance personnel raised flags over transactions in New York, according to the DFS.
These included “unusually large” dollar transfers, in round numbers, between Chinese and Russian companies and from Yemen companies to China, as well as “potentially suspicious dollar-denominated payments” from trading companies in the Middle East.
Some invoices appeared to be counterfeited or falsified, the compliance staff said, including dollar transactions apparently involving an Iranian party under US sanctions. Some of these transactions were sent through the global interbank-messaging system, the Society for Worldwide Interbank Financial Telecommunication, using coded messages that masked client identities to avoid DFS screening, according to the consent order.
After bringing the coded SWIFT messages to bank managers’ attention in the fall of 2014, the chief compliance officer in New York was told not to communicate those concerns to regulators. The officer resigned in mid-2015, followed by other compliance workers and replacements had inadquate resources, the DFS said.
The DFS didn’t identify the chief compliance officer.
Earlier this year, the lender was sued by a former chief compliance officer who ran the firm’s compliance in New York. The officer, Natasha Taft, said she was forced out of her job after telling the New York Fed about money-laundering risks in trade-financing transactions and alleged the bank retaliated against her for the disclosures in late 2014. The bank has denied the allegations. Taft couldn’t immediately be reached for comment.
The DFS is responsible for overseeing the financial services industry in New York. It has enforcement powers over banks chartered in the state, as well as insurance companies. Most large US banks are nationally chartered and regulated by the federal Office of the Comptroller of the Currency.