Premier Lin Chuan (??) ordered the Financial Supervisory Commission (FSC) Sunday to form a task force to probe alleged violations of U.S. anti-money laundering laws by Mega Bank in 2012, saying that the perpetrators must be held responsible.
Lin demanded that the FSC call a meeting with the central bank, the Ministry of Finance and the Ministry of Justice to set up an ad hoc group to investigate the alleged violations by the state-controlled bank.
The New York branch of Mega Bank, the flagship banking unit of Mega Financial Holding Co., has agreed to pay a US$180 million penalty to New York State's financial regulator for violating the U.S. Bank Secrecy Act (BSA) and anti-money laundering regulations, as well as paying lax attention to risk exposure in Panama, authorities said Friday.
The fine is part of a consent order entered into with the state's Department of Financial Services (DFS), pursuant to which, Mega Bank must take immediate steps to correct the violations, including engaging an independent monitor to address serious deficiencies within the bank's compliance program and implementing effective anti-money laundering controls, the DFS said in a statement issued Aug. 19.
"The DFS will not tolerate the flagrant disregard of anti-money laundering laws and will take decisive and tough action against any institution that fails to have compliance programs in place to prevent illicit transactions," Financial Services Superintendent Maria T. Vullo was quoted by the statement as saying.
The BSA/anti-money laundering officer for the New York branch, who was based at the bank's Taiwan headquarters, and the branch's chief compliance officer (CCO) both lacked familiarity with U.S. regulatory requirements. In addition, the CCO had a conflict of interests because she had key business and operational responsibilities, along with her compliance role, according to the statement.
The New York agency said the bank's head office was indifferent toward the risks associated with transactions involving Panama, recognized as a high-risk jurisdiction for money laundering. Mega Bank has a branch in Panama City and another in Panama's Colon Free Trade Zone. The DFS investigation identified a number of suspicious transactions running between Mega Bank's New York and Panama branches.
The DFS said its investigation also found "a substantial number of customer entities" with accounts at several other Mega Bank branches, "that were apparently formed" with input from Mossack Fonseca, the Panamanian law firm at the center of a massive leak of offshore financial data.
It said it has requested an explanation from the bank about alleged violations by its Panama branch of money laundering laws, and involvement in other suspicious transactions through written reports and bilateral meetings, but the bank has failed to give a full explanation.
It is the first time in a decade that a Taiwan-based financial institution has been penalized by the U.S. authorities, according to the FSC.
The latest fine issued to Mega Bank is equivalent to seven years of profits made by its New York branch, the bank said.
The bank has about US$103 billion in assets, including US$9 billion at its New York branch.
If Mega Financial books the fine as a loss for this year, the financial holding firm could see its earnings per share fall more than NT$0.4.
In the first quarter of this year, Mega Financial posted NT$0.56 in EPS, compared with NT$0.66 a year earlier. In 2015, Mega Financial's EPS stood at NT$2.35, compared with NT$2.43 a year earlier.
On Sunday, FSC Vice Chairman Kuei Hsien-nung (???) said the FSC will convene an inter-ministerial meeting soon and will deal with the issue as to who should be held responsible for the matter after the bank has filed a complete report on the matter.
He also said Taiwanese banks should improve the auditing of their overseas branches' operations.
Meanwhile, the Ministry of Finance promised that it will provide support to help the task force handle the case.
According to the ministry, after the news broke, the ministry, the FSC, and the central bank have all helped coordinate with the U.S. authorities in the hope of softening their stance on the matter.
It also said Taiwanese banks should strengthen the auditing of their internal operations to prevent similar cases from occurring.
In addition, Hsieh Chin-ho (???), chairman of Taiwan-based Investment Media Ltd., said on his facebook page Saturday that it is not a simple case and could be politically related, because it is not known who was involved in the money laundering process. He calling on the government to reveal any inside information it might have.
Hsieh pointed out several key issues that he said need to be addressed. First, the real reason behind the resignation of former Mega Financial Holding Chairman Tsai Yeou-tsair (???), who stepped down from the post in late March, ahead of the Democratic Progressive Party government taking over May 20.
Second, the suspicion surrounding the fact that former first lady Chow Mei-ching (???) worked as a lawyer for Mega Bank for more than 20 years before her resignation in 2008.
In addition, the government should shed more light on the case and should not let taxpayers foot the bill for payment of any fines.
Source: Focus Taiwan