The Federal Reserve and New York State Department of Financial Services issued an enforcement action against the Industrial and Commercial Bank of China Friday over misappropriation of confidential supervisory information and inadequate internal controls to combat money laundering, requiring the bank's U.S. subsidiary to pay $32 million in fines.
The U.S. subsidiary of the Beijing-based ICBC had been subject to a cease-and-desist order from the Fed and NYDFS since 2018 due to "significant deficiencies" in the New York branch's anti-money-laundering and foreign assets compliance programs. The NYDFS order noted that an examination of the branch in 2023 found that the bank had "successfully remediat[ed] all prior examination findings" related to the Office of Foreign Assets Control, or OFAC, compliance program and AML compliance.
However, NYDFS had been informed by a bank employee that the bank had failed to comply with know-your-customer, or KYC, requirements by failing to obtain a certification signature of a bank employee for compliance documents dating to 2014. The bank then attempted to have the employee — who had since left the bank — sign and back-date the KYC compliance documents.
"Faced with the unsigned certifications, the senior employee contacted the former employee multiple times in August 2015, and asked the former employee to countersign the certifications as relationship manager at the New York branch, a position the former employee no longer held," the NYDFS enforcement action said. "The senior employee also provided various dates in 2014 that the former employee should use when signing the certifications — all dates when the former employee was still a relationship manager at the New York Branch. The former employee obliged, signing, backdating, and returning to the bank signed copies of the certifications for five different banking clients."
The NYDFS enforcement action also detailed an incident in 2021 where a U.S.-based ICBC employee was attempting to transfer to an overseas branch, which necessitated approval from the overseas banking regulator in another country.
As part of that approval, the bank and employee had to complete a questionnaire which included details of any regulatory or disciplinary actions against the employee. The bank had engaged internal counsel, who determined that answering such questions could constitute dissemination of confidential supervisory information. ICBC engaged the NYDFS, Federal Reserve Board and Federal Reserve Bank of New York with proposed language, but sent that proposed language, as well as other confidential supervisory information, to the overseas regulator "without proper authorization."
The NYDFS ordered ICBC to pay a $30 million fine for failing to "maintain an effective and compliant anti-money-laundering program" as well as for sharing confidential supervisory information with an unauthorized party. The Federal Reserve fined ICBC another $2.4 million related to those violations.
ICBC is also ordered in the enforcement action to develop an internal control program for treatment of confidential supervisory information and submit a report to the NYDFS within 60 days on its progress toward AML compliance.
ICBC responded to the order in a statement, saying that the enforcement action relates to "certain historical weaknesses" at its New York branch and "do not reflect the current state of the Branch's compliance programs and internal controls" nor the branch's operations in the U.S.
"As acknowledged by the orders, ICBC New York Branch has made significant efforts towards successfully remediating past weaknesses," ICBC said in the statement. "Compliance and risk management have been, and continue to be, a top priority for ICBC New York Branch. ICBC New York Branch is fully committed to meeting all of the requirements of the orders and to satisfying regulatory expectations."
