Banking and Finance Law Daily New York fines Mashreqbank $40M for Bank Secrecy Act violations
Thursday, October 11, 2018

New York fines Mashreqbank $40M for Bank Secrecy Act violations

By Charles A. Menke, J.D.

The New York Department of Financial Services (DFS) has fined United Arab Emirates-based Mashreqbank PSC and its New York branch $40 million for Bank Secrecy Act and Anti-Money Laundering violations that took place in the New York branch’s U.S. dollar clearing operations. Under a consent order entered into with the DFS, Mashreqbank also agreed to a number of remedial actions, including hiring a third-party compliance consultant, as well as a third party "lookback consultant" to conduct a review of the branch’s transaction clearing activity from April 2016 to September 2016.

Cooperation, accountability. "Mashreqbank failed to fully comply with critical New York and federal banking laws aimed at combating international money laundering, terrorist financing and other related threats by failing to provide adequate oversight of transactions by customers in high-risk regions," DFS Superintendent Maria T. Vullo said. While acknowledging the bank’s "strong cooperation" to resolve the matter, Vullo stressed that "the bank is being held accountable for ensuring vigilance against money laundering and other illicit activity to ensure that our financial system remains safe and sound."

Examinations. The consent order stems from prior examinations by the DFS and the Federal Reserve Bank of New York. In 2016, the DFS conducted a safety and soundness examination of the New York branch’s operations and found that the branch had been unable to meet its commitments to sufficiently improve its compliance function. As a result, DFS examiners issued the branch a low overall score, in contrast to two years earlier when the New York branch received a satisfactory score on its safety and soundness examination. The downgrade was mainly the result of deficiencies in the New York branch’s BSA/AML program, as well as certain defects identified in its program and policies designed to comply with Office of Foreign Asset Control regulations.

Thereafter, in November and December of 2017, DFS examiners and examiners from the New York Fed conducted a joint examination at which time the examiners found that records regarding specific alerts and dispositions continued to lack detailed information, making it difficult for examiners to assess the adequacy of investigations conducted by compliance staff. The joint examination also found that the bank’s Head Office failed to provide sufficient oversight of a third-party auditor hired to conduct the branch’s 2017 AML/BSA audit and to evaluate the branch’s remedial work. The 2017 examination detailed additional deficiencies and assigned the New York branch another low score for the second consecutive examination cycle, which followed the branch’s earlier failures to fully remediate compliance issues.

Terms. In addition to the fine, the consent order mandates that Mashreqbank engage an independent third-party consultant chosen by the DFS to oversee and address deficiencies in the branch’s compliance function, including compliance with BSA/AML requirements, federal sanctions laws, and New York law and regulations. Mashreqbank must also provide the DFS with the following:

  • a written revised BSA/AML compliance program for the New York branch that is acceptable to the DFS;
  • a written program to reasonably ensure the identification and timely, accurate, and complete reporting by the New York branch of all known or suspected violations of law or suspicious transactions to law enforcement and supervisory authorities, as required by applicable suspicious activity reporting laws and regulations;
  • a written enhanced customer due diligence program acceptable to the DFS; and
  • a written plan to enhance oversight, by the management of the bank and the New York branch, of the branch’s compliance with BSA/AML requirements, New York State laws and regulations, and OFAC regulations.

Companies: Mashreqbank PSC; Mashreqbank, PSC, New York Branch

MainStory: TopStory BankingOperations BankSecrecyAct EnforcementActions FederalReserveSystem NewYorkNews OversightInvestigations StateBankingLaws

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