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July 07, 2020

IBK fined $86m in US over mishandling anti-money laundering program

PUBLISHED : May 25, 2020 - 17:13

UPDATED : May 25, 2020 - 17:13

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IBK headquarters in central Seoul (Yonhap)


State-run lender Industrial Bank of Korea and its New York branch have been fined $86 million by the Attorney General’s Office for allegedly failing to manage their anti-money laundering program, documents and local reports showed Monday.

The bank’s apparent decision to delay the upgrade of the program for nearly a decade, eventually led to its failure to detect transactions that violated US sanctions against Iran, settlement documents between IBK and the Attorney General’s Office in the Southern District of New York showed.

“From around 2011, and continuing until at least till 2014, IBK and IBKNY violated United States law by willfully failing to establish, implement and maintain an adequate anti-money laundering program at IBKNY,” the documents said.

“This failure permitted, among other things, the processing through IBKNY and other US financial institutions of approximately $1 billion in transactions on behalf of one or more IBK customers (in violation of US sanctions against Iran),” it added.

Due to the New York branch’s deficient program, a bank client was able to conduct nearly $1 billion worth of then-undetected transactions during a six-month period in 2011, which violated US sanctions against Iran, according to the document.

The client -– reportedly a small business owner -- is suspected of sending money from an account opened under the name of Iran’s central bank in an IBK branch in South Korea to accounts in five or six different countries via the New York branch, local reports said.

An IBK official told The Korea Herald on Monday that they are checking relevant facts concerning the matter. The official declined to comment on whether Korea’s watchdog the Financial Supervisory Service had known about the issue that spanned for nearly a decade.

“IBK had completed establishment of an automated anti-money laundering program according to our New York branch’s compliance officer’s requests, but there were parts that we were unable to satisfy the standards set by the US Attorney General’s Office and financial authorities,” IBK said in a statement.

Alongside the $86 million fine, IBK entered a two-year deferred prosecution agreement with the US Department of Justice and a non-prosecution agreement with New York Attorney General Letitia James, earlier reports said.

IBK has been licensed to operate in the US since 1990.

By Jung Min-kyung (mkjung@heraldcorp.com)

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