OCC to Japan’s Largest Bank - Fix AML Issues! and Survey Says - HMDA Reporting!
Written by Shari R. Pogach, NAFCU Regulatory Paralegal
The world’s fifth largest bank, Mitsubishi UFJ Financial Group, Inc. (MUFG Bank) was recently given another warning that it had better quickly fix its anti-money laundering (AML) issues. The bank was issued a cease and desist order by the Office of the Comptroller of the Currency (OCC) for Bank Secrecy Act (BSA) compliance program deficiencies within its New York, Chicago and Los Angeles branches.
An examination of the branches’ BSA/AML and Office of Foreign Assets Control (OFAC) compliance program found problems going back to June 2016. Program weaknesses led to violations including:
- Inadequate internal controls, ineffective independent testing and weak BSA officer/staffing;
- Deficiencies in transaction monitoring, resulting in monitoring gaps in several high risk areas, including international wires flowing through high risk locations so suspicious activity reports (SARs) were not timely filed;
- Ineffective foreign correspondent due diligence program;
- Gaps in trade finance monitoring; and
- Poor auditing of customers and products.
The MUFG Bank branches also continue to operate under a November 2017 OCC consent order requiring corrective actions to improve the OFAC compliance program.
Interestingly, New York state financial regulators had previously fined the bank hundreds of millions of dollars for not properly monitoring who its customers were and where their money came from. An independent monitor assigned by the New York Department of Financial Services indicated in a March 2017 report that a former employee colorfully noted the severity of the problems with the bank’s AML program.
MUFG Bank switched from being licensed by the state of New York to a federal license in November 2017. This resulted in a current court fight between the bank and the New York Department of Financial Services. The state regulators contend the bank had not demonstrated it had corrected its AML program issues prior to trading its charter and regulator. Then in November 2018, The New York Times reported that federal prosecutors are also investigating the bank for transactions involving North Korea.
The current OCC order doesn’t provide and specific illegal transactions or OFAC violations. It also doesn’t come with any monetary penalty but could be the starting point for negotiations over the size of a potential fine.
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