On August 24, the New York Department of Financial Services (NYDFS) announced that it had assessed a nearly $630 million fine against a global bank (Bank) and its New York branch as part of a consent order addressing allegations that the Bank failed to fix “serious” and “persistent” failures in its Bank Secrecy Act and anti-money laundering (BSA/AML) compliance programs. NYDFS claimed in its Notice of Hearing and Statement of Charges (Notice) that these failures “indicate a fundamental lack of understanding of the need for a vigorous compliance infrastructure, and the dangerous absence of attention by [the Bank’s] senior management for the state of compliance at the [Bank’s] New York branch.” NYDFS will move for the penalty at a hearing scheduled for September 27, 2017. According to an order issued that same day, NYDFS expanded its investigation into the alleged misconduct to cover the period between October 1, 2013 through September 30, 2014, and April 1, 2015 through July 31, 2017. Specifically, the violations cited in the Notice include the following:

  • 855 “batch-waived” transaction alerts that were improperly “cleared by [New York] Branch staff without review or rationale for the failure to review the alerts” and without written approval of the batch waive process by head office or local management;
  • control deficiencies concerning the Bank’s relationship with a Saudi Arabian bank with reported ties to Al Qaeda and the financing of terrorism—transactions with the Saudi Arabian bank comprised approximately 24 percent of the total number of transactions conducted through the New York branch;
  • more than 13,000 transactions failed to identify essential information such as originator and beneficiary identities; and
  • more than 4,000 transactions were excluded from screening after being included on the Bank’s “good guy list” comprised of customers “who purportedly have been screened and identified as very low risk,” although the investigation identified several parties that had been either “improperly included” or met criteria which warranted screening.

The Bank issued a press release following the announcement, stating its plans to “vigorously contest [the penalty] . . . as being unjustified, capricious, unreasonable, not supported by facts or law and as being time barred.” The Bank claimed it has undergone “sincere and extensive remediation measures” to improve its compliance efforts since NYDFS issued an order in 2015 calling for oversight and improvements to its BSA/AML processes. The Bank expressed its intention to surrender its foreign bank branch license for the New York branch and NYDFS has issued an order to effectuate the surrender by September 23, 2017.