WASHINGTON The Federal Reserve Board issued an enforcement action against one of the biggest banks in China on Tuesday, ordering its New York branch to undergo broad restructuring of its anti-money-laundering compliance program.
The order requires China Construction Bank to develop a written compliance program within 60 days to bring the bank's sole U.S. branch into compliance with the Bank Secrecy Act and related AML controls.
Under the order, the branch must improve its internal controls to address risks associated with correspondent accounts for foreign financial institutions, including affiliates; engage in broader and more complete data monitoring; and institute appropriate AML training for branch employees. The order also requires the bank to improve its customer due diligence and risk assessment process, as well as enhance its suspicious activity monitoring and reporting programs.
The branch must also develop an enhanced internal audit program within 60 days and must immediately comply with information requests and related requirements of the Financial Crimes Enforcement Network.
Additionally, the order requires the bank to engage a third party to review the New York branch's U.S. dollar clearing activity during a six-month period between July 1 and December 31, 2013, "to determine whether suspicious activity involving high-risk customers or transactions at, by, or through the branch was properly identified and reported" to authorities. That third-party review must commence within 30 days.
China Construction Bank is one of the largest commercial banks in China and one of the biggest and most prosperous companies in the world. The bank's market capitalization topped $176.7 billion in 2013, according to the bank's website, and it had total assets of just under $2.7 trillion.
The Fed's order is a rare example of U.S. authorities brining enforcement actions against Chinese banks, though the agency has been increasingly bold in its requirements of foreign bank with branches in the U.S. The Fed earlier this month issued a similarly sweeping order against the Spanish megabank Santander for its lack of internal capital adequacy and risk management controls. And in June, the San Francisco Fed brought an AML compliance order against Bank of the Orient, a U.S.-based community bank with branches in San Francisco, Hawaii and Xiamen, China.