The U.S. Federal Reserve said last week it was requiring Commerzbank AG in Germany and its New York branch to improve compliance with federal and state anti-money laundering (AML) laws.
The Fed action didn’t involve allegations of corruption or specific charges. But it provided a window into AML compliance best practices.
In June 2012, Commerzbank had agreaed to improve AML compliance. A recent Fed examination, however, showed that the bank was still falling short.
The New York branch’s Bank Secrecy Act (BSA) and AML compliance program was deemed “unable to maintain appropriate and adequate internal controls for its banking operations.” This included the failure to create adequate internal controls and mitigate risks associated with the bank’s foreign correspondent accounts.
The Fed’s new cease and desist order didn’t impose any financial penalties.
The cease and desist order specified a new governance and customer due diligence best practices so the bank’s New York branch can meet the objectives of the 2012 agreement more fully. These include:
- Ensuring the branch’s BSA/AML program has the resources and status it needs to perform its role
- Retaining an independent consultant to review this compliance program and prepare a written report
- Providing ongoing updates about its enhanced program and how the branch is meeting new amendments to the BSA as they are implemented
- Documenting any policy exceptions by the bank to senior management
- Training employees and managers on a regular basis about AML compliance
- Assuring that third-party vendors and affiliates are exercising proper due diligence over customer accounts
- Revising customer risk-ranking methodologies for assigning risk ratings to the branch’s customer base to take into account type of customer, type of product or service, geographic location, etc, and
- Providing appropriate due diligence via policies and controls over foreign correspondent accounts, using enhanced measures when necessary
Within 30 days after each calendar quarter, Commerzbank AG and its New York branch must file joint progress reports about what they’ve done in furtherance of the order and its goals.
The October 17, 2013 Federal Reserves Cease and Desist Order against Commerzbank AG (Frankfurt am Main, Germany) and Commerzbank AG New York Branch (New York, New York) Docket Nos. 13-027-B-FB and 13-027-B-FBR can be found here.
Julie DiMauro is the executive editor of FCPA Blog. She can be reached here.