Pasadena’s East West Bank must beef up its efforts to prevent money laundering after federal regulators said its practices were not sufficient.
The bank, which has operations in the United States, Hong Kong, China and Taiwan, was ordered by the Federal Reserve on Thursday to correct problems with its anti-money-laundering programs.
The Fed did not specify how the bank had fallen short and said only that regulators found deficiencies in practices during recent examinations.
Regulators over the past few years have levied steep penalties against banks for failing to monitor and report potentially illicit activities. In July, banking giant Citigroup said it would shut down Banamex after the Century City-based subsidiary, which did business in the Mexican market, was fined $140 million for failing to fix its anti-money-laundering systems. And last year, French bank BNP Paribas agreed to pay $9 billion after pleading guilty to helping clients steer money illegally into Iran and other countries.
The action against East West does not include a fine or penalty, suggesting that any infractions regulators found likely were minor, according to an attorney who handles anti-money-laundering cases who asked not to be identified.
Still, East West will have to take a number of steps to improve its compliance with provisions of the federal Bank Secrecy Act. That law generally requires banks to ensure that laundering activities are not taking place at their institution.
Banks are supposed to know the source of their customers’ funds and report suspicious transactions. That might include a restaurant owner who typically deposits $1,000 in cash a week and then suddenly deposits $10,000, which would require the bank to inquire about the transaction. If the bank determines the activity is suspicious, it must be reported to the federal Financial Crimes Enforcement Network.
East West agreed to gather more information about its customers, including those who are overseas, and change how it judges the risk of customers.
The bank also will have to hire an independent consultant to review accounts and transactions involving high-risk customers to see whether any suspicious activity occurred between April and October of last year.
East West spokeswoman Emily Wang said that the bank has been working to improve its anti-money-laundering processes over the past year and that it will comply with the terms of its agreement with the Federal Reserve.
“This is an important step for the bank to continue improving our Bank Secrecy Act and anti-money-laundering program to keep up with the expectations of regulators,” Wang said.
Shares of East West Bank closed down 95 cents Thursday to $40.85.
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