The Financial Supervisory Commission (FSC), the top financial regulator in Taiwan, said Saturday that it has asked local banks to tighten control on their overseas outlets after Mega International Commercial Bank (???) ran into regulatory problems in the United States and is ordered to pay a massive fine for violating anti-money laundering rules.
FSC Vice Chairman Kuei Hsien-nung (???) said that Taiwanese banks should strengthen the auditing of their overseas branches’ operations and demand their overseas outlets closely follow laws in foreign markets in a bid to avoid any violation similar to the one for which Mega Bank has been fined.
The Department of Financial Service (DFS) of New York State announced Friday that it has imposed a US$180 million fine on Mega Bank’s New York branch. The branch was found to have violated the U.S. Bank Secrecy Act, which is also known as the anti-money laundering law.
Mega Bank, formerly the International Commercial Bank of China, is the flagship banking unit of Mega Financial Holding Co. (???)
The New York branch of Mega Bank has been asked to pay the fine in 10 days. The fine made Mega Bank the first Taiwanese bank to face such a penalty for failing to abide by the U.S. anti-money laundering law.
According to the FSC, Mega Bank has had similar violations in other foreign markets. Its branch in South Africa was slapped with a fine of more than NT$10 million (US$316,455) by the country’s central bank for not complying with anti-money laundering rules, according to the FSC.
A branch of Mega Bank in Australia was also found to have flaws in its compliance with the Australian anti-money laundering law, but no penalties were imposed, the FSC said.
Kuei said that Taiwan has comprehensive regulations on how to control the banking sector’s operations in an effort not to violate anti-money laundering rules. The FSC official said that now it is the banks’ duty to tighten their internal supervision and auditing.
Kuei said that Mega Bank faced such a huge fine in New York because its branch there did not follow the rules in the United States to report to local authorities when the outlet found customers’ transactions at risk of violating the anti-money laundering law.
New York’s Department of Financial Service (DFS) 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.”
Financial Services Superintendent Maria T. Vullo also 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.”
The fine is equivalent to seven years of profits raked in by Mega Bank’s New York branch, the bank said. If Mega Financial books the fine as a loss for this year, the financial holding firm could see its earnings per share (EPS) fall more than NT$0.4.
In the first quarter of this year, Mega Financial posted NT$0.56 in EPS, compared with NT$0.66 a year earlier. In 2015, Mega Financial’s EPS stood at NT$2.35, compared with NT$2.43 a year earlier.
Source: Focus Taiwan