New York's state bank regulator has heavily fined and censured the Agricultural Bank of China for violating anti-money laundering laws and obscuring suspicious transactions. What are the details?

finews.asia reported recently that the authorities in the United States had issued a stern warning to the New York branch of Agricultural Bank of China citing «significant deficiencies» at the bank.

Last Friday The Department of Financial services New York said in a statement on their website that Agricultural Bank of China (AgBank) will pay a $215 million penalty and install an independent monitor for violating New York’s anti-money laundering (AML) laws.

Dubious Money Transfers

The regulator also flagged numerous suspicious transactions involving Russia, China, Afghanistan and other countries.

Citing a deliberate failure to scrutinise dubious money transfers, the Department of Financial Services (DFS) said the bank, the third-largest in the world, created a substantial risk that terrorist groups, sanctions-barred countries and criminals could have passed funds through the bank.

Whistleblower Silenced

The move by the powerful New York regulator followed action taken in  September by the Federal Reserve, which ordered AgBank to improve internal controls against money laundering. The bank had also «silenced»a whistleblower who attempted to carry out internal investigations, according to the DFS.

Bank examiners found the bank had used «evasive» transaction methods, including masking the true identity of parties to transactions using SWIFT, the global network which enables financial transfers.

Catalogue of Transgressions

Compliance personnel at the New York Branch also discovered alarming transaction patterns, including:

  • Unusually large round dollar transfers between Chinese and Russian companies;
  • Unusually large round dollar payments from Yemen to companies in China;
  • Potentially suspicious dollar denominated payments from trading companies located in the Middle East;
  • Dollar transactions remitted by a Turkish Bank customer for its Afghan Bank client which is known by the U.S. Treasury Department for its associations with a Hawala network having associations with narcotics traffickers and illicit cash flows; and
  • Certain invoices involving China and Russia appeared to be counterfeit or falsified, while other documents suggested U.S. dollar trades with Iranian counterparties – including documentation indicating dollar transactions were made for the benefit of a sanctioned Iranian party – information that had been omitted from the SWIFT wire messaging.

Under the consent order, Agricultural Bank of China will retain and install an independent monitor within sixty days of its selection by DFS for two years to conduct a comprehensive review of the effectiveness of the Branch’s program for compliance with the Bank Secrecy Act (BSA)/AML requirements and the state laws and regulations.