On Oct. 10, NYDFS fined Mashreqbank of UAE, $40mn for AML.
- UAE-based Mashreqbank and NY branch, violated AML and recordkeeping laws.
- Multiple deficiencies in bank's compliance with AML laws and OFAC regulations.
- Violations occurred in US dollar clearing operation about the New York branch.
- Follows examinations by DFS and Federal Reserve Bank of New York (FRBNY).
- Failed to provide oversight for transactions by customers in high-risk regions.
- Mashreqbank is oldest, largest UAE private bank, NY branch is only one in US.
- Branch offers correspondent banking and trade finance services dollar clearing.
- Services to clients located in Southeast Asia, the Middle East and North Africa.
- Such regions that present a high risk in connection with financial transactions.
- Did substantial dollar clearing, in 2016, 1.2mn transactions, valued of $367bn.
Exams of NY Branch
- DFS conducted safety and soundness exam of NY branch’s operations in 2016.
- Found branch unable to meet commitments to improve its compliance function.
- DFS gave branch low overall score, whereas two years earlier, was satisfactory.
- Downgrade due to deficiencies in BSA/AML program, defects in OFAC program.
- Policies lacked detail, nuance, complexity, little more than citing rule language.
- Follow-up exam at end 2017, found records re alerts lack detailed information.
- Difficult for examiners to assess adequacy of investigation by compliance staff.
- Transaction monitoring alert would be reviewed only once by a single reviewer.
- Reviewer would determine if alert should be closed, without quality assurance.
- OFAC program deficiencies in documentation on disposition of alerts and cases.
- Compliance staff failing to substantiate rationales, for waiving alerts and cases.
- Bank head office failed to oversee auditor hired to review 2017 AML/BSA audit.
- Bank must hire third-party to address deficiency, review trade clearing activity.
- DFS said appreciated Mashreqbank’s strong cooperation, to resolve the matter.
- Mashreqbank must file with DFS revised BSA/AML compliance program for NY.
- Program to ensure identification and timely, accurate, and complete reporting,
by NT branch of all known or suspected violations of law or suspicious trading.
- A written enhanced customer due diligence program that is acceptable to DFS.
- Plan to enhance oversight by head office management of bank and NY branch.