NY fines Chinese bank for money laundering
Local MFI relaunched after S Korean buyout
NEW York’s state bank regulator fined the giant Agricultural Bank of China $215 million on Friday for violating anti-money laundering laws and obscuring suspicious transactions involving Russia, China, Afghanistan and other countries.
Citing a deliberate failure to scrutinise dubious money transfers, the Department of Financial Services said the bank, the third-largest in the world, created “a substantial risk” that terrorist groups, sanctionsbarred countries and criminals could have passed funds through the bank.
The bank had also “silenced” a whistleblower who attempted to carry out internal investigations, according to the Department of Financial Services.
The move by the powerful New York regulator followed a September action by the Federal Reserve, which ordered AgBank to improve internal controls against money laundering.
Natasha Taft, a former staffer, settled a lawsuit against the bank that month after claiming she had been forced out of her job after reporting potential violations to the Fed.
Department of Financial Services also said on Friday that bank staff had taken deliberate steps to hide US dollar transactions passing through its New York branch that could have been tied to violations of trade sanctions and anti-money laundering laws.
Bank examiners found the bankhadused“evasive”transac- tion methods, including masking the true identity of parties to transactions using SWIFT, the global network which enables financial transfers.
According to the Department of Financial Services, examiners identified unusually large round-dollar transactions between Chinese companies and counterparties in Russia and Yemen, dollar payments between a customer of Turkish Bank and a client at Afghan Bank whom the US Treasury had linked to financial network used to fund drug trafficking.
“Certain invoices involving China and Russia appeared to be counterfeit or falsified, while other documents suggested US-dollar trades with Iranian counterparties – including documentation indicating dollar transactions were made for a sanctioned counterparty,” the Department of Financial Services said.
Agricultural Bank of China also deliberately ignored warnings from the agency to improve its internal compliance measures as the volume of international transactions increased beginning in 2013, the Department of Financial Services said.
“Department of Financial Services will take swift and appropriate action when our investigation finds egregious conduct and intentional circumvention of a regulated bank’s compliance program,” Financial Services Superintendent Maria Vullo said in a statement.
In addition to paying the penalty, the bank agreed to take immediate steps to improve its legal compliance, including hiring an outside monitor. CAMBODIA’S booming microfinance sector continues to attract international investors, with a South Korean financial institution the latest to buy out one of the Kingdom’s myriad microlenders.
The Seoul-based Welcome Fi na nc i a l Group ( WFG) announced on Friday that it had acquired the full shareholding of Green Central Microfinance Ltd for an undisclosed sum, and rebranded itWelcome Finance (Cambodia).
The rebranded microfinance institution (MFI) launched operations on Friday.
Lee Sang-kook, chief executive officer of Welcome Finance (Cambodia), said the acquisition was part of his company’s strategy to capture growth opportunities in Cambodia where the financial sector is enjoying high growth.
He said the deal was completed earlier this year and received approval from the National Bank of Cambodia (NBC) in April.
He said Welcome Financial Group purchased the MFI with the aim of developing Cambodia’s financial services market, and would look to expand its operations in order to serve more customers.
“We will increase the investment capital to expand our operation areas in order to provide more financial services to satisfy our customers’ needs,” he said.
Green Central received its operating licence in 2008 and has five branches in and around Phnom Penh.
Its total assets reached $8.9 million at the end of 2015, with net profit of $569,784 last year, according to central bank’s latest annual report.
As of the end of June, the microlender had $7.73 million in loans outstanding, according to the Cambodian Microfinance Association (CMA).
Mergers and acquisitions of the Kingdom’s MFIs have become common as foreign financial institutions, many facing slow growth prospects at home, seek to tap into Cambodia’s rapidly growing credit market.
In 2014, South Korea-based Woori Bank purchased local MFI Malis Finance for $4.9 million. This year, Thailand-based Bank of Ayudhya finalised an agreement to acquire Hattha Kaksekar Ltd (HKL), Cambodia’s fourth-biggest MFI, in a deal believed to be worth more than $140 million.
CMA president Hout Ieng Tong, who is also the president and CEO of HKL, welcomed South Korea’s latest investment in the Kingdom’s microfinance sector.
He said the launch of Welcome Finance (Cambodia) would add another solidly backed player to the local market, and the MFI would benefit from the superior technological capacity of its new parent company. This should improve convenience and service quality for customers.
“The compet it ion i n t he industr y is gett ing tougher, requiring players to upgrade skills and build strong confidence among their customers,” he said.
According CMA’s half-year report, 47 MFIs plus seven NGOs posted outstanding loan values at $3.26 billion during the first six months of 2016, an increase of 34 per cent compared with the same period a year earlier.
Meanwhile, total deposits increased to $1.75 billion as of end-June, compared to $1.12 billion a year earlier for Kingdom’s eight licensed microfinance deposit-taking institutions.
Certain invoices involving China and Russia appeared to be counterfeit or falsified, while other documents suggested US-dollar trades with Iranian counterparties