The Industrial Bank of Korea (IBK) and its New York branch will pay a total of $86 million for violations of New York Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) laws.
The IBK NY branch office failed to maintain adequate policies and procedures for BSA/AML compliance, as well as fell short in maintaining an effective transaction monitoring system, among several other problems.
The examination conducted by New York State Department of Financial Services revealed that the NY branch did not have in place procedures and policies that would enable the bank to verify the identity of each customer entering business with the branch.
Moreover, the branch failed to identify transactions that deviated from anticipated customer behaviors, which led to overlooking of money laundering cases. The branch, for example, failed to perceive Kenneth Zong’s money laundering. Zong, a U.S. naturalized citizen conspired to transfer funds in Korean Won to US dollars using fictitious contracts, and invoices to a fictional Iranian enterprise.
The bank acknowledged that DFS’s examination had identified shortcomings in the New York branch’s anti-money Laundering and risk management programs and agreed to remediate the compliance deficiencies.
The New York Attorney General’s Office (NYAG) and the U.S. Attorneys’ Office for the Southern District of New York (SDNY) resolved the investigation.
The NYAG: non-prosecution agreement
The SDNY: deferred prosecution agreement
Fines: Total of $86 million ($35 million to NYDFS and $51 million to the NYAG and SDNY).
New York State Department of Financial Services press release: https://www.dfs.ny.gov/press_releases/pr202004201
“Create A World Where Good People Transact Safely and Keep The Bad People Out.”