The China Construction Bank, in terms of assets, is the world's second largest bank. (Photo : Reuters)
China Construction Bank (CCB), the world's second largest bank by assets, was urged by the U.S. Federal Reserve and the New York Department of Financial Services to do more to fight money laundering in its New York branch.
On Tuesday, the regulators said that the CCB is asked to address "deficiencies relating to the branch's risk management and compliance" in accordance with the Bank Secrecy Act.
The U.S. Fed's order emphasizes that the Chinese bank must have better monitoring services for its account holders. It also calls for the creation of a new audit program for internal purposes.
The regulators also said that CCB should submit plans both for compliance and customer due diligence programs to help its battle against money laundering and suspicious transactions, giving the financial institution 60 days.
The CCB confirmed the enforcement action, through its New York brank chief compliance officer Mildred Harper; but it left no comment about the issue.
According to a Fed database, it is the first time that the U.S. central bank enforced such action to CCB. The data furthermore shows that no action similar to CCB's was undertaken with three other large Chinese banks: Agriculture Bank of China, Industrial and Commercial Bank of China, and Bank of China.
Though the Fed did not levy fine or other sanctions, it did not disclose the specifications of the money laundering issue of CCB.
However, a person familiar with the concern said that the action was fuelled by problems in the correspondent banking business. The CCB is allegedly doing dollar transactions representing foreign banks that do not exist in the U.S., the source stated, adding that the bank has been in trouble monitoring transactions.
In the U.S., regulators have major concerns over banks failing to vet foreign correspondents properly. For the past years, even high-profile banks have been imposed with huge fines for not complying with U.S. guidelines.
Currently, CCB has branches in 24 countries. It offers corporate banking services to Chinese and domestic businesses.
