Taiwan is investigating if Mega Financial Holding Co and its banking unit broke local criminal laws in a case that led to U.S. authorities fining the state-controlled group $180 million for anti-money laundering violations.
New York authorities on Friday slapped Mega International Commercial Bank with the fine for violations that included lax attention to risk exposure in Panama, the first time in a decade that a Taiwan-based financial institution has been penalized by U.S. authorities.
The fine is a major embarrassment for the Taiwan government because Mega Financial, whose management has close ties to key government officials, is an industry pillar in the island’s financial system.
The disciplinary action comes as anti-money laundering (AML) controls at banks in Greater China are under intense scrutiny abroad, following a series of high-profile judicial investigations and regulatory probes in the United States and Europe.
Taiwan authorities are examining documents from Mega Financial and its banking unit as part of the investigation, Chang Chieh-chin, deputy head prosecutor with the Taipei District Public Prosecutors Office, told Reuters by telephone.
Chang said prosecutors also are reviewing information from the island’s finance ministry and Financial Supervisory Commission regarding the matter.
“We are gathering information and will review it to see if there has been any violation of criminal law in Taiwan,” Chang said.
The New York State Department of Financial Services (DFS) said Mega’s U.S. compliance program was a “hollow shell” with insufficient transaction monitoring and reporting controls and inconsistent compliance policies.
The bank’s compliance staff also lacked familiarity with U.S. AML regulations while several were also conflicted because they held multiple roles, the DFS said in a court document.
The DFS found that nearly $11.5 billion of credit transactions took place between Mega’s New York and Panama branches in 2013 and 2014. “The bank’s head office was indifferent toward risks associated with transactions involving Panama,” despite the fact it was recognized as a high risk jurisdiction, the DFS said in a statement.
Shiu Kuang-si, chairman of Mega Financial, defended the bank’s conduct, saying it did not help customers launder money overseas. Mega International Commercial’s New York branch failed to report a “suspect transaction” to U.S. authorities, as required by law, he told Reuters.
Mega’s branch in Colon, Panama, had closed an account by a customer from “Central or South America” because it was deemed a “suspicious account”, he said.
When money was remitted to the shuttered account, the branch rejected and returned the funds to the originating bank, he said. However, under U.S. rules, remittances involving suspicious accounts must be declared to New York financial authorities, which Mega failed to do, he said.
Mega Financial shares slumped 6.3 percent on Monday, after news of the U.S. fine. They were down 0.2 percent on Tuesday.