The Financial Supervisory Commission (FSC) yesterday said that it has asked local banks to tighten control over their overseas outlets after Mega International Commercial Bank (兆豐銀行) ran into regulatory problems in the US and was ordered to pay a massive fine for breaching rules against money laundering.
FSC Vice Chairman Kuei Hsien-nung (桂先農) said that Taiwan’s banks should improve the auditing of their overseas branches’ operations and demand that they closely follow laws in foreign markets to avoid breaches similar to the one for which Mega Bank has been fined.
The New York State Department of Financial Services (DFS) on Friday announced that it has imposed a US$180 million fine on Mega Bank’s New York branch. The branch was found to have breached the US’ Bank Secrecy Act.
Mega Bank is the flagship banking unit of Mega Financial Holding Co (兆豐金控).
The New York branch has been asked to pay the fine within 10 days. The fine made Mega Bank the first Taiwanese bank to face a penalty for failing to abide by the US money laundering law.
Kuei said that Mega Bank faced the huge fine because its branch did not follow the rules in the US to report to local authorities when the outlet found customers’ transactions at risk of violating the regulations.
The New York agency said in a statement that it “will not tolerate the flagrant disregard of anti-money laundering laws and will take decisive and tough action against any institution that fails to have compliance programs in place to prevent illicit transactions.”
It said the bank’s compliance officers were unfamiliar with US regulations and failed to periodically review information meant to detect suspicious transactions.
The department said the bank’s head office was indifferent toward risks associated with transactions from Panama, a high-risk area for money laundering.
US Department of Financial Services Superintendent Maria Vullo said in the statement that the “compliance failures that DFS found at the New York branch of Mega Bank are serious, persistent and affected the entire Mega banking enterprise and they indicate a fundamental lack of understanding of the need for a vigorous compliance infrastructure.”
Mega Bank has had similar violations in other foreign markets, the FSC said.
Its branch in South Africa was slapped with a fine of more than NT$10 million (US$316,275) by the South African central bank for not complying with rules against money laundering, according to the commission.
A branch of Mega Bank in Australia was found to have flaws in its compliance with Australian money laundering regulations, but no penalties were imposed, the commission said.
The latest fine issued to Mega Bank is equivalent to seven years of profits made by its New York branch, the bank said.
The bank has about US$103 billion in assets, including US$9 billion at its New York branch.
If Mega Financial books the fine as a loss for this year, the financial holding firm could see its earnings per share fall more than NT$0.4.
In the first quarter of this year, Mega Financial posted earnings per share of NT$0.56, compared with NT$0.66 a year earlier.
Last year, Mega Financial’s earnings per share stood at NT$2.35, compared with NT$2.43 in 2014.
Meanwhile, the issue has raised suspicion about the resignation of former Mega Financial chairman Mckinney Tsai (蔡友才), who stepped down from the post in late March.
The timing of his resignation ahead of the Democratic Progressive Party government taking over on May 20 has triggered speculation about the real reason behind his decision, local media reported yesterday.
Additional reporting by AP
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