Sunday, August 21, 2016


The New York State Department of Financial Services, judged by many to be the most effective AML enforcement regulator in the United States, has concluded a Consent Order with Mega International Commercial Bank Co. Ltd., A Taiwanese bank, with branches in New York and the Republic of Panama. This agreement, which includes a $180m fine, for massive AML deficiencies, and the bank's mandatory institution of major remedial measures, across the board, on compliance, should be required reading for all compliance officers. The deficiencies were so widespread, that you are encouraged to review the complete text, which can be accessed here.

Just as important, especially for compliance officers at banks located in North America, are the details surrounding the AML failures at the bank's two Panama offices; one in Panama City, the other in the Colon Free Trade Zone. The NYSDFS Order, which  specifically refers to Panama as a "high risk jurisdiction for money laundering," twice, in the text, describes a shopping list of AML defects.

One of the most unusual violations listed was the pattern of "debit authorizations" (payment reversals), whereby, often months after a wire transfer was effectuated, it was reversed, and the funds returned. Of particular note was the fact that the bank allows this transfer even after the customer had closed his account in Panama. Some of these transfers were to and from the same customer.The utility of such a technique, where permitted by a bank, to facilitate money laundering, is painfully obvious.

Neither the Panama City, nor the Colon, branches have been subject to any action by Panamanian banking regulators, according to public records. Compliance officers should immediately check their recent wire transfer records, to determine whether their bank has engaged in any transactions with Mega, and immediately open an investigation into the circumstances surrounding those transfers, the parties involved, and the underlying business relationships shown by those transfers.

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