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.