Agricultural Bank of China (ABC) has agreed to pay a US$215 million penalty for falsifying transaction documents involving China and Russia and trying to cover up US dollar trades with sanctioned Middle Eastern countries, New York State’s Department of Financial Services (DFS) has said.

The bank has already been ordered by the US Federal Reserve to address “significant deficiencies” in its anti-money laundering systems while two years ago, the bank’s former chief compliance officer (CCO) notified the New York authorities that there were money-laundering risks in the bank’s trade finance operations (Trade Based Financial Crime, 12 October 2016).

Correspondent concerns

Examiners for DFS found that ABC’s New York branch conducted US dollar clearing in rapidly increasing volumes since 2013 through foreign correspondent accounts, even after the department warned the bank not to increase its dollar clearing transactions until it significantly improved its compliance function.

The bank was found to have “willfully ignored” DFS’s warning and dollar clearing transactions “skyrocketed” in 2014 and 2015, creating an untenable risk at a time when ABC was not able to satisfy even basic compliance requirements.

Opaque SWIFT messages

The bank also employed what DFS describes as “non-transparent and evasive transaction methods”, including sending coded messages through the SWIFT system that masked the true parties to a transaction and avoided DFS screening.

The CCO, who was forced to resign from the bank, expressed “concern” that “trade finance is a new frontier for money laundering” and said it appeared that “transactions related to clearing US dollars for ABC’s trade related customers for letters of credit and collection transactions…are not identified on [the branch’s] payment messages.”

A copy of the DFS order regarding ABC can be found here.

Categories: Trade Based Financial crimes News