Bank Fined for Panama Papers Link

Taiwan’s Mega International Commercial Bank has been slapped with a $180 million fine by the New York State financial regulator for a range of anti-money laundering failures. These failures included ties to Mossack Fonseca, the now-infamous law firm at the center of the Panama Papers scandal.

Mega International Commercial Bank is a global financial institution with roughly $103 billion in assets. The Department of Financial Services (DFS) described the bank’s approach toward the risks associated with transactions in Panama as indifferent, identifying a slew of suspicious-seeming transactions between the bank’s New York City- and Panama-based branches, which include a branch in Panama City and one in Panama’s Colon Free Trade Zone.

Additionally, the DFS found that the bank’s Bank Secrecy Act (BSA) Anti-Money Laundering (AML) compliance officer, who was based in Hong Kong, was unfamiliar with the intricacies of U.S. regulations. The officer also had a conflict of interest, as in addition to her compliance role she also had critical business and operational responsibilities. It was also discovered that compliance staff members were not undertaking adequate measures to detect potentially suspicious transactions and that the bank’s New York City branch lacked coherent and consistent compliance policies.

DFS 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,” Financial Services Superintendent Maria T. Vullo explained in a press release. “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. DFS’s recent examination uncovered that Mega Bank’s compliance program was a hollow shell, and this consent order is necessary to ensure future compliance.” Because of the DFS investigation, the bank must install an independent consultant to remedy these compliance deficiencies, as well as hire an independent monitor.

The Taiwanese government also took steps to investigate the bank. Earlier this month, Taiwan’s Financial Supervisory Commission (FSC) fined the bank and removed several key figures from the bank’s executive management, alleging that poor government and management led to these compliance issues in the first place. Among those dismissed were CEO Wu Han-ching, Auditor General Liu Hsiao-ling, New York branch Deputy General Manager Liang Mei-chi and General Manager Huang Shih-ming, and Chief Compliance Officer Chen Tien-lu. All were dismissed on the grounds of negligence. Mckinney Tsai, the bank’s former chairman, was also ordered to step down from his current board position and will not be allowed to work in the country’s banking sector for five years. He was allegedly aware of the company’s violations uncovered by the DFS but failed to take any action to remedy the issues.

While this is the first case linked to the Panama Papers scandal, it is unlikely to be the last. Regulators and law enforcement agencies are increasingly looking at the documents that were leaked in order to get a better idea of who has violated the law. The leak has also helped provide a better idea of what banks individuals use to violate these laws.

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