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Bank of Korea to pay $35m to New York for violations of money laundering, record keeping laws

Christian Fernsby ▼ | April 20, 2020
Superintendent of Financial Services Linda A. Lacewell announced that the New York State Department of Financial Services (DFS) has entered into a consent order with Industrial Bank of Korea (IBK) and its New York branch under which the bank will pay fines totaling $35 million to New York State for violations of New York Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) laws.
Bank of Korea
New York   Bank of Korea
The DFS investigation found that from 2010 to 2019, IBK had repeated problems identified by DFS examinations and failed to do the following, among other violations:

Topics: Bank of Korea New York money laundering

Maintain adequate policies and procedures for BSA/AML compliance and an effective transaction monitoring system, among other problems. Due in part to the bank’s poor internal controls, including its deficient transaction monitoring system, IBK failed in 2011 to capture and prevent a billion-dollar fraud on the bank and its New York branch;

Capture a money laundering scheme that ran from February 2011 through July 2011. IBK’s client, Kenneth Zong, allegedly circumvented United States sanctions laws by transferring funds from IBK’s restricted account to his IBK account in Korean Won, and, in turn, Zong allegedly converted the funds into U.S. dollars and transmitted them to persons and entities located globally. The vast majority of these transactions, which totaled nearly $1 billion, cleared through financial institutions located in New York, including IBK’s New York branch and at least one other DFS-regulated bank; and

Resolve repeated deficiencies in its regulatory obligations, including overall condition, risk management, operational controls and compliance. These deficiencies, among others, resulted in a Written Agreement that IBK entered into with DFS and the Board of Governors of the Federal Reserve System in 2016. In the agreement, IBK acknowledged that bank examinations had identified deficiencies in the New York branch’s compliance and risk management programs and agreed to remediate these deficiencies.