Federal Reserve orders Chinese bank to correct BSA/AML controls

Financial Crimes Federal Reserve Bank Secrecy Act Anti-Money Laundering Bank Compliance International Customer Due Diligence

On March 12, the Federal Reserve Board (Fed) entered into a consent order with a Chinese bank (bank) and its New York branch (branch) in connection with alleged Bank Secrecy Act and anti-money laundering (BSA/AML) violations. According to the Fed’s order, a recent examination identified “significant deficiencies” in the branch’s BSA/AML compliance and risk management controls. The consent order requires, among other things, the bank and branch submit within 60 days: (i) a written governance plan to achieve compliance with BSA/AML requirements; (ii) a system to identify and assess risks associated with all products and customers, including “politically exposed persons”; (iii) an enhanced customer due diligence program plan; and (iv) a compliance program to ensure accurate suspicious activity monitoring and reporting. The bank and branch are further required to engage an independent third party acceptable to the Fed to review their dollar-clearing transaction activity in the second half of 2016 “to determine whether suspicious activity involving high-risk customers or transactions” was properly flagged. The order imposes no financial penalty.