South Korean banking operations in New York could face a barrage of punitive and remedial actions from the U.S. state regulator for incompliance with state and federal anti-money laundering regulations.
According to multiple sources on Wall Street, the New York State Department of Financial Services (DFS) is deliberating fining NongHyup Bank’s New York branch within the year.
Korea’s state-backed Industrial Bank of Korea and Woori Bank received intense scrutiny from U.S. authorities for their transactions with Iran in 2012 when the U.S. imposed tough sanctions on the country to make it give up its nuclear program. Shinhan Bank America was also subject to an administrative action from the U.S. Federal Deposit Insurance Corp. this year for violating anti-money laundering rules.
But none have so far received financial penalties. Fines may not be small as they are determined in the context of total bank assets.
Earlier this year, NongHyup Bank handed in a written agreement to the Federal Reserve Bank of New York to address its compliance deficiencies. It did not enter into a settlement with the DFS, which is a joint supervisor of the money-laundering compliance act.
New York-based Korean banks fear they could come under similar scrutiny and punitive actions.
U.S. federal and state authorities have toughened watch over foreign exchange and transactions of financial operations in the country as part of their fight against terrorism financing. The New York DFS last year announced a new set of anti-money laundering requirements that took effect in April this year. A number of European banks were fined for violations, and Asian banks are said to be next to be scrutinized.
By Hwang In-hyuk and Kim Hyo-jin
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