Arab Bank Signs Consent Orders with FINCEN and OCC

By Victor Comras

Arab Bank has reached an agreed settlement with FINCEN and OCC concerning allegations of money laundering conducted through its New York Branch. The money laundering allegations relate to the failure of the New York branch of Arab bank to monitor transactions, initiated by correspondent banks or affiliates outside of the U.S. The Comptroller's findings indicate that the New York Branch engaged in substantial funds transfer operations involving transactions that originated in other offices of Arab Bank or by other third party correspondent banks and that it failed to have in place adequate controls to monitor, audit or obtain sufficient information concerning the nature of such transactions. "The inadequacy of the Branch's Bank Secrecy Act controls over its funds transfer operations is especially serious," the Comptroller found, "in light of the high risk characteristics of many of the transactions."

Under the settlement, Arab bank neither admits or denies FINCEN charges that it failed to put in place adequate anti-money laundering procedures. In the press release accompanying announcement of the settlement, Arab Bank states that it had not engaged in any intentional wrong doing. It claims that it had diligently applied AML controls on transactions initiated by direct customers but did not believe that the same controls applied also to wire transfers in which the branch had only an intermediary role.

The Consent order in this case clarifies that all banks doing business in the United States must apply the same AML controls to correspondent banking transactions as they do to their own customer accounts.

Arab Bank has been under investigation for possible violations of provisions of the Bank Secrecy Act and other banking regulation. It entered into a consent decree with the Comptrollers Office on February 8, 2005 submitting the bank to regulatory oversight and requiring it to preserve its assets.

The FBI reportedly opened a criminal investigation into Arab Bank several years ago regarding alleged movement of funds for suspected terrorists. The investigation was triggered after U.S. regulators examining Arab Bank operations in New York City found that the bank had 40 to 60 suspected terrorists and groups as customers. They were allegedly associated with al-Qaida, Hamas and Hezbollah. Officials say all had accounts with the bank or had moved money through the New York office. Based in Jordan, Arab Bank operates in 30 countries worldwide with assets of about $27 billion. See previous Lee Wolosky Blog on this topic

TrackBack