Mashreq New York reaches settlement
BANK AGREES TO PAY $40M AS PART OF THE SETTLEMENT
Mashreqbank announced yesterday that it has agreed to a “Consent Order” with the New York State Department of Financial Services (DFS). This stems from examinations by DFS and the New York Fed |
Mashreqbank announced yesterday that it has agreed to a “Consent Order” with the New York State Department of Financial Services (DFS). The order stems from examinations by DFS and the Federal Reserve Bank of New York (FRBNY).
The agreement addresses findings related to the New York Branch’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) programme and gaps in execution of its Office of Foreign Assets Control (OFAC) sanctions compliance programme identified during regulatory examinations in 2016 and 2017. The Financial Services Superintendent of DFS, Maria T. Vullo, said in a statement that the DFS has fined Mashreqbank and its New York branch $40 million for violations of BSA and AML laws in the New York branch’s US dollar clearing operations.
The settlement reached between the regulator and Mashreq is understood to be final. The Consent Order did not specify any wilful violation by Mashreq and DFS also did not state that any transactions went through the bank’s systems violating regulations.
While noting that the branch did not meet compliance requirements DFS in the period specified, the regulator noted the bank was quick in resolving the issue.
“Mashreqbank failed to fully comply with critical New York and federal banking laws aimed at combating international money laundering, terrorist financing and other related threats by failing to provide adequate oversight of transactions by customers in high-risk regions,” said Vullo. “DFS appreciates Mashreqbank’s strong cooperation in resolving this matter.”
Mashreqbank’s New York branch offers correspondent banking and trade finance services and provides dollar clearing services to clients. In 2016, the branch cleared more than 1.2 million transactions with an aggregate value of over $367 billion. In 2017, the branch cleared well over one million dollar transactions with an aggregate value exceeding $350 billion.
While the fine relates to deficiencies in prescribed compliance requirements, DFS commended Mashreq for demonstrating a commitment to remediating the shortcomings identified, and to building an effective and sustainable BSA/AML and OFAC compliance infrastructure. Among other factors, DFS has given substantial weight to the laudable conduct of Mashreqbank described in the Consent Order in agreeing to the terms and remedies of the consent order, including the amount of the civil monetary penalty imposed.
Remedial measures
Under a consent order, Mashreqbank must immediately hire a third-party compliance consultant to oversee and address deficiencies in the branch’s compliance function, including compliance with BSA/AML requirements, federal sanctions laws and New York law and regulations. The bank must also hire a thirdparty “lookback consultant” to conduct a review of the branch’s transaction clearing activity for April 2016 to September 2016, along with other remedial actions.