Requiring Anti Money-Laundering
The New York State Department of Financial Services (DFS) will impose a huge fine on South Korean banks that have branches in New York.
According to investment banking industry sources on November 14, the DFS is planning to order NH Nonghyup Bank and its New York branch to strengthen compliance with the requirement of anti money-laundering along with the imposition of a large-scale fine as early as next month. This is the first South Korean bank which is subject to such disciplinary action. This is because the branch found deficiencies relating to its risk management systems and compliance with New York State and federal laws, rules and regulations concerning anti-money laundering. Some say that the DFS will levy hundreds of billions of won of a fine considering the assets of NH Nonghyup Bank in South Korea.
The bank’s New York branch is consulting a U.S.-based law firm on the issue. With the latest DFS’ move, NH Nonghyup increased the related workforce from two to five. An official from NH Nonghyup Bank said, “The bank hasn’t violated any laws and expects to get an administrative fine due to a lack of systems. It added more operation specialists and upgraded anti-money laundering systems in order to prevent recurrence in the future.”
The Wall Street is on the alert over the “second BNP Paribas incident” as the U.S. financial authorities have been targeting Asian banks in the last one to two years after large European banks. BNP Paribas, the largest bank in France, had to pay penalties of almost 10 trillion won (US$8.9 billion) in 2014 for making financial transactions worth US$30 billion (33.46 trillion won) with Iran, Sudan and Cuba.
The next targets are said to be Woori Bank and Industrial Bank of Korea (IBK). IBK and Woori Bank were quested by the U.S. financial regulator in 2012 as a large sum of money withdrew from the won payment accounts of the Central Bank of Iran (CBI) at the banks as fraud transactions.
Accordingly, domestic banks that have branches in New York such as KB Kookmin Bank, Shinhan, KEB Hana Bank are also seeking to improve their monitoring systems. The IBK has increased its number of compliance experts in the New York branch from one to six. Shinhan Bank America faced administrative restrictions from the Federal Deposit Insurance Corporation (FDIC) this year for violating anti-money laundering laws.