Caixin
Mar 14, 2018 05:15 PM
BUSINESS & TECH

U.S. Warns China’s Largest Bank Over Money Laundering Protections

The Industrial and Commercial Bank of China's branch on Shanghai's iconic riverside Bund. Photo: VCG
The Industrial and Commercial Bank of China's branch on Shanghai's iconic riverside Bund. Photo: VCG

The U.S. Federal Reserve has ordered the Industrial & Commercial Bank of China Ltd. (ICBC) to bolster its protections against money laundering.

The central bank identified “significant deficiencies” in the risk management of the Chinese lender’s New York branch, which failed to comply with laws and regulations that seek to prevent money laundering, the Fed said in an enforcement order on Tuesday.

ICBC, which has agreed to resolve the issue without going to court, will be given two months to submit new policy plans to the Fed, and was instructed to work out an “internal program” with risk-based auditing that “encompasses all appropriate areas of audit coverage,” the order said.

Specifically, the Fed has asked ICBC to hire an independent agent to conduct a review of its U.S. dollar clearing transaction activity from July through December 2016, to check for suspicious activity involving high-risk customers or transactions.

State-owned ICBC, the world’s largest bank by market value, operates over 400 branches in more than 40 countries and regions globally. Its overseas branches dealt with transactions worth at $897 billion in 2016, according to the company.

This is not the first time ICBC has been involved in such controversy. In 2016, ICBC’s branch in Madrid, Spain, was accused of involvement in money laundering, and several senior executives were arrested.

In 2017, a Spanish judge launched an investigation to ICBC’s European headquarters in Luxembourg, charging it with aiding criminal organizations in laundering more than $256 million.

ICBC is one of several Chinese banks that have found their overseas branches facing tightening regulations in recent years in Europe and the U.S.

In 2016, the Agricultural Bank of China Ltd. was sanctioned by the Fed with a $215 million penalty for violating a similar anti-money laundering law.

Contact reporter Mo Yelin (yelinmo@caixin.com)

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