BEIJING: China Construction Bank has been ordered to tighten money-laundering controls at its New York branch to resolve an enforcement action brought by the US Federal Reserve and the New York Department of Financial Services.
The world’s second-largest bank by assets is working to address “deficiencies relating to the branch’s risk management and compliance” with the Bank Secrecy Act, the regulators said on Tuesday. The order calls for better oversight of account holders and the creation of a new internal audit program.
The bank should submit plans for compliance and customer due diligence programs to help curb money laundering and suspicious transactions within 60 days, the Fed said.
Mildred Harper, chief compliance officer at CCB’s New York branch, confirmed the enforcement action but declined to comment.
It is the first time that the Fed, the United States’ central bank, has taken an enforcement action against CCB, according to a Fed database. The records show that no similar actions have been taken against any of the three other large Chinese banks－Bank of China, Industrial and Commercial Bank of China and Agricultural Bank of China.
The Fed did not impose a fine or other immediate sanctions on the bank, and it did not detail what specific problems CCB was facing.
But a source familiar with the matter said the Fed action was driven by issues in the correspondent banking business, in which banks transact in dollars on behalf of foreign banks that have no presence in the United States.
There have been problems with how CCB monitored transactions, said the source, who asked not to be named.
The issue of banks failing to properly vet foreign correspondents is a major concern for regulators in the US. Some banks are acting as a gateway to the US financial system without doing enough to keep criminals out, regulators say.
Some high-profile banks have been hit with huge fines in recent years for failing to adhere to US guidelines and a range of compliance issues.
Last year, BNP Paribas pleaded guilty to two criminal charges and agreed to pay almost $9 billion to resolve accusations that it violated US sanctions against countries such as Sudan, Cuba and Iran.
In 2012, HSBC Holdings paid a $1.9 billion fine to the US authorities, a record at the time, for allowing itself to be used to launder drug money from Mexico’s Sinaloa cartel and Colombia’s Norte del Valle cartel.
CCB has branches in 24 countries and offers corporate banking services to Chinese and local companies. Its New York office is regulated by the state and the Federal Reserve Bank of New York.
Eric Kollig, a Fed spokesman, declined to comment. No response to a request for a comment had been received from the bank’s Beijing headquarters by press time.
