NEW YORK, May 16 (Reuters) - Industrial and Commercial Bank of China Financial Services agreed to pay $5.3 million on Wednesday to settle charges by the Financial Industry Regulatory Authority that it did not have adequate anti-money laundering systems in place to monitor and detect suspicious transactions.
In a separate matter, the U.S. Securities and Exchange Commission said on Wednesday that ICBC’s financial services unit agreed to pay an $860,000 fine for problems also related to its anti-money laundering policies, including failing to file suspicious activity reports.
The actions by FINRA and the SEC are the latest in a string of regulatory probes or fines by U.S. and European regulators over anti money-laundering and know-your-customer controls by Chinese banks. Analysts say the actions will likely slow these banks’ growth into overseas markets.
ICBC has been clearing and settling clients’ equity transactions through its financial services unit in the United States since 2012. FINRA said ICBC cleared and settled 33 billion of penny stock shares for customers between January 2013 and September 2015.
FINRA, the self-regulator for the U.S. securities industry, said the bank’s anti-money laundering system was ineffective and lacked the means to monitor suspicious penny stock liquidations or to detect or investigate red flags.
“Firms that engage in high-risk activities such as penny stock clearing are the gatekeepers to the market and must establish a reasonable supervisory system to detect and report suspicious trading activity,” Susan Schroeder, FINRA’s executive vice president for the department of enforcement, said in a statement.
ICBC did not admit or deny the FINRA charges.
The SEC’s claims stemmed from the liquidation of 12.5 billion penny stock shares that ICBC’s financial services unit cleared between October 2013 and June 2014.
The SEC said the bank violated record-keeping and reporting rules because it did not file suspicious activity reports to regulators despite clear warning signs.
“The failure to file (suspicious activity reports) in the face of numerous red flags is unacceptable,” said Marc Berger, director of the SEC’s New York regional office.
ICBC also did not admit or deny the SEC charges.
Reporting By Elizabeth Dilts; editing by Bill Berkrot
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