ACGBF Agricultural Bank of China (PK)

By Christopher M. Matthews 

Agricultural Bank of China, one of the country's largest banks, agreed to pay a $215 million penalty Friday to resolve allegations by New York's banking regulator that the lender violated anti-money-laundering laws.

The New York Department of Financial Services accused the bank of deliberately disguising transactions routed through its New York office that could have hidden laundering of illicit funds or violations of U.S. sanctions laws. Officials at the bank obfuscated U.S.-dollar transactions and failed to update the bank's compliance controls, the department said in a civil consent order filed Friday.

Representatives for the bank didn't immediately respond to a request for comment.

The regulator stopped short of accusing the bank of outright money laundering, but said that compliance staff at the bank who discovered unusual transactions, some involving Russian, Chinese and Middle Eastern companies, were silenced when they tried to raise concerns. That stymieing caused the bank's chief compliance officer to resign, according to the department.

Under the terms of the consent order, the bank admitted to the regulator's allegations.

The settlement is the New York regulator's first with a Chinese bank and among the most significant it has reached since Superintendent Maria Vullo was installed to lead the office earlier this year. The Department regulates all banks chartered in New York, which includes some of the largest foreign lenders in the world. It has emerged as an aggressive pursuer of financial crime since its creation in 2011.

Compliance experts have long warned of money laundering risks at Chinese banks, which have been slower to adopt the stringent internal controls installed by Western banks over the last decade, in part due to aggressive enforcement by U.S. authorities.

In September, the U.S. Federal Reserve ordered Agricultural Bank of China to address "significant deficiencies" in its money laundering controls. Another of China's largest lenders, Bank of China Ltd. was ordered by the U.S. Office of the Comptroller to address its own money-laundering deficiencies earlier this year.

The actions by U.S. regulators follow a lawsuit brought this year against Agricultural Bank of China by the former chief compliance officer at its New York branch, Natasha Taft, who said she was forced out of the lender after reporting money laundering issues to the Federal Reserve Bank of New York in 2014. Ms. Taft, the only female executive at the branch, also accused the bank of sexual harassment and discrimination.

In the consent order filed Friday, the Department of Financial Services said the bank increased its U.S. dollar transactions with foreign correspondent banks in 2013, even after the regulator warned the bank it couldn't do so until it bolstered compliance controls. The regulator also said the bank routinely sent coded messages on transfers to hide who was involved in the transactions.

Compliance staff also discovered alarming transactions, the regulator said, including potentially illegal U.S.-dollar trades with Iranian counterparties and unusually large, round-sum transactions involving Russian and Chinese companies.

When the compliance officer, Ms. Taft, reported the coded transaction messages to bank management in the fall of the 2014, the regulator said officials told her not to report her findings to regulators. After Ms. Taft resigned in 2015, much of the bank's compliance staff also resigned, according to the regulator.

--Nicole Hong contributed to this article.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

(END) Dow Jones Newswires

November 04, 2016 15:00 ET (19:00 GMT)

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