Federal banking regulators have ordered the U.S. branches of MUFG Bank to make a host of upgrades after finding problems with their efforts to sniff out money laundering.
The Office of the Comptroller of the Currency said Friday that the branches, located in New York, Los Angeles and Chicago, will be required to take certain corrective actions. But it did not hit the Japanese bank with any financial penalties, even though it found extensive problems with its branches’ compliance efforts.
MUFG Bank said in a press release that its written agreement with federal regulators did not identify illegal transactions. The bank also said that it has made improvements to its U.S. branches’ compliance program — citing the establishment of a Global Financial Crimes Division based in New York.
“The OCC has recognized that MUFG made improvements,” the bank stated, “and that additional improvements are underway.”
MUFG Bank, a subsidiary of Mitsubishi UFJ Financial Group, has been under the OCC’s supervision since late 2017, when it abruptly abandoned its state charter in New York. The Tokyo-based bank is separate from MUFG Union Bank, which has the same parent company and is headquartered in San Francisco.
MUFG Bank's charter switch came at a time when its efforts to combat money laundering were facing close regulatory scrutiny in the Empire State. The move sparked a loud backlash from the New York Department of Financial Services, which accused the company of engaging in regulatory arbitrage.
The charter switch also stoked tensions between the OCC and state regulators. In November 2018, Comptroller Joseph Otting
Otting argued that federal supervision results in regulation that is both more efficient and more thorough, in a speech that drew a rare public rejoinder from the Conference of State Bank Supervisors.
The New York regulatory agency, which has been locked in litigation over the charter switch, did not respond to a request about the agreement announced Friday.
According to the agreement, the OCC found gaps in the efforts at the MUFG branches to monitor international wires flowing through high-risk places. It also found significant gaps in the branches’ processes for monitoring trade finance, as well as problems in its efforts to evaluate correspondent accounts for foreign financial institutions.
Furthermore, federal regulators found that the New York, Chicago and Los Angeles branches failed to file suspicious activity reports in a timely manner.
The OCC said in a press release that problems date back to June 2016. The MUFG branches neither admitted nor denied the OCC’s findings.
Since the bank’s charter switch in November 2017, MUFG branches in the U.S. have been operating under an agreement with the OCC that requires them to improve their compliance with regulations from the Treasury Department’s Office of Foreign Assets Control, which enforces U.S. sanctions. That order remains in effect.
