(This story corrects to say Chicago branch manager replaced voluntarily, not at request of U.S. regulators)
TAIPEI (Reuters) - A U.S. state regulator has found the Chicago banking branch of Taiwan’s Mega Financial Holding Co has not met required compliance controls, the president of the Taiwanese financial firm told Reuters on Friday.
It is the second bank branch of the state-controlled firm to run afoul of U.S. financial authorities, after its New York branch was fined $180 million for lax compliance and anti-money laundering violations in August.
Mega Financial, which has close ties to Taiwan’s government, has been under scrutiny since about 200 of its customers were named in the so-called Panama Papers, a massive leak of documents from a Panamanian law firm that put the spotlight on the shadowy world of offshore companies used to avoid tax.
President Bruce L.Y. Yang said financial regulators had uncovered problems with internal controls at the Chicago branch of Mega International Commercial Bank, known as Mega Bank.
“The Chicago branch has to improve some deficiencies in regulatory compliance,” Yang said. He added that the branch manager had been replaced, but it was unclear if the bank would face a fine.
Mega Bank said in a statement on Saturday that local regulators found deficiencies at the Chicago branch during a regular annual inspection at the start of this year.
Mega Bank head office determined there were problems with procedures and internal controls at the branch and voluntarily replaced the Chicago branch manager in June, while urging the branch to make improvements, the statement said.
The manager was not replaced at the request of the U.S. regulators, it said.
Yang, the president of both the parent holding company and the bank, one of Taiwan’s biggest lenders, said its chairman, Michael C.S. Chang, would travel to Chicago, New York and Canada next week.
Terry Horstman, a spokesman for the Illinois state banking regulator, whose jurisdiction includes Chicago, declined to comment on whether the agency had examined or probed the bank.
“At this point in time, there is no public enforcement action against Mega International Commercial Bank’s branch in Chicago by the Illinois Department of Financial & Professional Regulation’s banking division,” Horstman said.
Chang told a news conference earlier this week that Mega Bank’s overseas branches were coming under greater scrutiny by regulators abroad following critical lapses involving suspect transactions between its New York and Panama branches.
Chang said the branches underwent annual inspections but regulators, including those in the United States, Canada and Panama, have become more stringent about them in the wake of the fine the New York State Department of Financial Services slapped on Mega’s New York branch in August.
The New York regulator had found lax compliance and anti-money laundering violations involving Panama transactions.
Mega Bank has branch offices in Los Angeles, Chicago and New York.
Reporting by Liang-sa Loh; Additional reporting by Suzanne Barlyn in New York; Writing by J.R. Wu; Editing by Alex Richardson