November 25, 2020

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IBK Settlements with US Authorities Regarding BSA/AML Violations

On April 20, 2020, the Industrial Bank of Korea (IBK) and its New York branch (IBKNY) (collectively, “the Bank”) entered into a Deferred Prosecution Agreement (DPA) with the U.S. Attorney’s Office for the Southern District of New York (SDNY), a non-prosecution agreement (NPA) with the New York Attorney General, and a Consent Order (the “Consent Order”) with the New York State Department of Financial Services (NYDFS), to resolve  violations of the Bank Secrecy Act (BSA), the International Emergency Economic Powers Act (IEEPA), the Iranian Transactions and Sanctions Regulations (ITSR), and various provisions of New York law.  The transactions at issue exceeded $1 billion, and the Bank agreed to an overall penalty of $86 million.

SDNY imposed a $51 million forfeiture for the Bank’s willful failure to establish and maintain an anti-money laundering (AML) compliance program, finding that the Bank’s compliance failures were so extraordinarily egregious and sustained that the Bank specifically intended to violate its obligations under the BSA.  NYDFS imposed a separate $35 million penalty for the Bank’s failure to maintain appropriate books, accounts, and records of all transactions as well as its failure to maintain an effective and compliant AML program.  Notably, the settlement with NYDFS follows a 2016 Written Agreement between the Bank, NYDFS, and the Federal Reserve Bank of New York (FRBNY) (the “Written Agreement”), reached after regulatory examinations identified serious and protracted deficiencies in IBKNY’s BSA/AML compliance program and its efforts to comply with regulations of the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and New York State and federal laws.

Our new client alert covers the IBK settlements and their implications in more detail.  We summarize the conduct that led to these settlements, which began nearly ten years ago.  We discuss the extreme compliance deficiencies identified by the regulators and consider how the Bank’s repeated and protracted failures to address those critical deficiencies resulted not only in additional regulatory scrutiny but ultimately in criminal liability.  We review the DPA and the Consent Order, and highlight the facts on which SDNY and NYDFS relied to find the Bank culpable.  We then examine the lessons for US financial institutions and domestic branches of foreign banks.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 135
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Benjamin D. Wood Partner  Washington DC Litigation Government Investigations and White Collar Crime
Partner

Ben Wood assists clients in federal and state litigation at the trial and appellate levels, and in government investigations and enforcement matters. Ben has represented financial institutions, corporations, individuals, political organizations, campaigns and foreign governments in matters involving economic sanctions, money laundering, bank fraud, Bank Secrecy Act, public corruption, industrial disasters, healthcare fraud and campaign finance litigation.

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Kevin McCart White Collar Attorney Squire Patton Boggs Washington DC
Partner

Corporations and individuals facing allegations of white-collar criminal and civil violations call upon Kevin McCart to provide the effective legal strategies and investigative skills that will help them avoid prosecution and minimize damaging outcomes. Kevin has been lead counsel in criminal and civil matters in federal district and circuit courts, as well as military courts-martial. His global government and internal investigations background includes representing financial institutions, corporations and individuals in economic sanctions, money laundering, bank fraud, the Bank Secrecy...

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Trevor T. Garmey Government Investigations Attorney Squire Patton Boggs Washington DC
Senior Associate

Trevor Garmey assists clients in navigating sensitive government investigations, developing robust compliance programs and managing reputational risk. Trevor has defended corporate executives, foreign nationals, financial institutions and municipalities against allegations of bribery, fraud and insider trading, and violations of US sanctions and export controls. Trevor has represented clients in proceedings before the Department of Justice (DOJ), the Securities Exchange Commission (SEC), foreign law enforcement and numerous federal courts.

Prior to entering private practice, Trevor...

202-457-6516
Richard Gibbon Criminal Defense Attorney Squire Patton Boggs Dubai, United Arab Emirates
Partner

Rich Gibbon is a partner in our Government Investigations & White Collar Practice and focuses on white collar criminal defense, regulatory enforcement and internal investigations. He has been based in the Middle East for 11 years and has extensive experience managing crises and counselling boards of directors and senior management across the Middle East and Africa, Levant, Europe, and South Asia through multi-agency, multi-jurisdictional financial crime investigations and enforcement actions. This includes multinational corporates in connection with anticorruption regimes and a...

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