This week the Federal Reserve Bank of San Francisco announced that East West Bank, based in Pasadena, California and with subsidiaries in China and Hong Kong, has entered into an agreement to strengthen its anti-money laundering (AML) and Bank Secrecy Act (BSA) compliance. The agreement covers many of the same areas as the New York Fed’s recent agreement with The Bank of Nova Scotia, which we discussed in a November 12 post, and calls for revamped compliance programs for key areas, including BSA/AML, Customer Due Diligence, and Suspicious Activity Monitoring and Reporting.
Of interest are two obligations the agreement imposes in connection with the Bank’s required Suspicious Activity Monitoring and Reporting. Like The Bank of Nova Scotia agreement, the agreement requires East West Bank to undertake, through an outside consultant, a retrospective review of the Bank’s “account and transaction activity associated with any high risk customer accounts conducted at, by, or through the Bank from April 1, 2014 to October 31, 2014,” to determine whether suspicious activity was property identified and reported. The agreement also calls for the creation of an automated transaction monitoring system in order to comply prospectively with Suspicious Activity Monitoring and Reporting requirements.
These recent agreements signal that the Federal Reserve, not just FinCEN, is ramping up its focus on AML/BSA compliance and taking a strong role in overseeing the development of adequate programs at banks, especially those with ties to potentially risky countries such as China, to protect the U.S. financial system. It appears likely that we will see more civil enforcement actions without financial penalties as the government attempts to bring more financial institutions into compliance without imposing onerous financial penalties.