A New York State Department of Financial Services investigation into the Agricultural Bank of China has resulted in an agreement by the Bank to pay a US$215 million penalty and install an independent monitor for violating New York’s anti-money laundering laws.
The 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 (CCO) at the New York Branch, who tried to raise serious concerns to Branch management and conduct internal investigations regarding suspicious activity, leading the CCO to ultimately resign.
Amongst other things, the Bank was found to employ non-transparent and evasive transaction methods, including 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 DFS.
The Consent Order recites:
The ultimate responsibility for the design and implementation of these policies and systems belongs at the very top echelon of the institution. The board of directors and senior management must devote careful study to the design of the [anti-money] laundering and other compliance systems that lie at the core of this first line of defense. They must provide sufficient resources to undergird these systems and structures, including appropriate and evolving technology where cost effective. Adequate staffing must be put in place, and training must be ongoing.
Management cannot be focused solely on business or branch development. Compliance must be a central pillar of management’s responsibilities. Senior executives need to be proactive, dedicated to a strong program, and unwavering in their commitment to keep the program on their agenda. When there is a material failure in a compliance program — in its structure, implementation, execution or policing — senior management must bear responsibility.
The Bank has been sued by the former chief compliance officer who ran the firm’s compliance in New York. The officer 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. See Bloomberg article here.
