The Ministry of Finance (MOF) yesterday asked all state-run financial institutions to improve regulatory compliance at their overseas branches by hiring local experts, despite higher costs.
The ministry, the largest shareholder in state-run financial institutions and responsible for the appointments of their chairpersons, made the request after a meeting with the institutions’ top executives yesterday afternoon.
Deputy Minister of Finance Su Jain-rong (蘇建榮) said the ministry will mete out punishments after it received the results of a cross-ministerial probe into the failure of Mega International Commercial Bank’s (兆豐銀行) New York branch to comply with rules against money laundering.
The New York State Department of Financial Services on Friday announced in a statement that the New York branch of Mega bank agreed to pay a US$180 million fine for violating the US Bank Secrecy Act and money laundering regulations.
The branch failed to notify local regulators of more than 70 transactions in 2012 that involved Panama, a high-risk area for money laundering, the department said in the statement.
After hearing a report by Mega Financial Holding Co (兆豐金控) chairman Shiu Kuang-si (徐光曦), Su attributed the bank’s violation mainly to negligence that could have been avoided if it had a better understanding of New York’s compliance requirements.
Mega bank should have notified the ministry and the Financial Supervisory Commission of the issue as soon as the US authorities first demanded a solution in February, Su said.
“The incident shows the need for local compliance counsel. All state-run financial institutions should make use of local experts at overseas branches to avoid similar negligence,” Su said.
Such an arrangement would entail significant compliance costs.
Taishin International Bank (台新銀行), the main unit of Taishin Financial Holding Co (台新金控), last year called off plans to set up a branch in the US over concerns of high compliance costs, the conglomerate’s chief financial officer Welch Lin (林維俊) said yesterday.
Mega Financial president Wu Hann-ching (吳漢卿) has offered to step down over the mishap, but the most profitable state-run financial institution has asked Wu to remain in his post until the government probe is completed.
Mega bank rejected media reports that its New York branch was fined for money laundering.
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