The Federal Reserve Board of Governors has chastised one of the largest banks in the world, Industrial and Commercial Bank of China, for “significant deficiencies” in its risk management and anti-money laundering compliance at its Manhattan branch.
The Fed on Tuesday issued a cease and desist order against the parent bank in Beijing and its New York branch that details not so much what the bank must stop doing, but what it must start doing—or at least do better.
The consent order contains nearly 10 pages of specific compliance reforms agreed to by the bank. The reforms include appointing a “qualified compliance officer who is given full autonomy” to implement and maintain an effective anti-money laundering program and who “is supported by adequate staffing levels and resources.”
While the order doesn’t accuse the bank of specific misconduct, it does say that the most recent examination of the branch by the Federal Reserve Bank of New York “identified significant deficiencies” in the branch’s risk management and its adherence to laws and regulations relating to anti-money laundering compliance, including the Bank Secrecy Act.
Spokesman Tian Beng, reached at the New York branch, said the bank has no statement at this time.
Under the order, the bank has 60 days to submit six written plans and programs to the New York Fed.
The first plan would be for sustainable corporate governance and management oversight. It is to include improved compliance with anti-money laundering requirements as well as regulations of the U.S. Office of Foreign Assets Control.
The plan also is to include measures to ensure that “compliance issues are appropriately tracked, escalated, and reviewed by both the branch and the bank’s senior management, and reported directly to the bank’s board of directors.”
In addition, the bank would specify “allocation of adequate staffing levels and resources to ensure the branch’s compliance with this agreement.”
The second plan is for a written, revised anti-money laundering compliance program. Among other elements, this program is to include a qualified and autonomous compliance officer, a comprehensive risk assessment, and identification of information systems used to achieve compliance, along with a timeline to review key systems to make sure they are configured to mitigate risks.
Other written plans involve a revised customer due diligence program; an enhanced program for monitoring, investigating and reporting suspicious banking activity; a program to enhance the branch bank’s compliance with OFAC regulations; and a revised internal audit program.
The order also gives the bank 30 days to hire an independent third party, acceptable to the New York Fed, to review the branch’s “U.S. dollar clearing transaction activity from July 1, 2016, through Dec. 31, 2016, to determine whether suspicious activity involving high-risk customers or transactions at, by, or through the branch was properly identified and reported.”
The consent order was signed by Shu Gu, president of the bank in China; Yuqiang Xiao, general manager of the New York branch; and Ann Misback, secretary for the Fed.