WASHINGTON/ST. LOUIS (Reuters) - The Federal Reserve told China Construction Bank Corp to do more to fight money laundering on Tuesday, in the first ever enforcement action by the U.S. central bank against one of China’s four largest state-owned banks.
Within 60 days, the bank should submit plans for compliance and customer due diligence programs to help curb money laundering and suspicious transactions, the Fed said.
Mildred Harper, chief compliance officer for CCB’s New York branch, confirmed the enforcement action.
It is the first time the Fed has taken an enforcement action against CCB, according to a Fed database, which showed no similar actions for any of the three other large Chinese banks: Bank of China, Industrial and Commercial Bank of China and Agricultural Bank of China.
The Fed did not impose a fine or other immediate sanctions on the bank, and did not detail what specific problems CCB was facing.
But a source familiar with the matter said that the Fed action was driven by issues in the correspondent banking business, in which banks transact in dollars on behalf of foreign banks that have no presence in the United States.
There have been problems with how CCB monitored transactions, said the source, who asked not to be named because details of the investigation have not been made public.
The issue of banks failing to properly vet foreign correspondents is a major issue for regulators. Some banks are acting as a gateway to the U.S. financial system without doing enough to keep bad actors out, regulators say.
Some high-profile banks have been hit with huge fines in recent years for failing to adhere to U.S. guidelines and a range of compliance issues.
In July, 2014, BNP Paribas pleaded guilty to two criminal charges and agreed to pay almost $9 billion to resolve accusations it violated U.S. sanctions against countries such as Sudan, Cuba and Iran.
Late in 2012, HSBC Holdings Plc paid a $1.9 billion fine to U.S. authorities, a record at the time, for allowing itself to be used to launder drug money from Mexico’s Sinaloa cartel and Colombia’s Norte del Valle cartel.
Reporting by Douwe Miedema and Brett Wolf; Editing by David Gregorio and Tom Brown