Foreign Bank and NY Branch Fined for Unauthorized Disclosure of Supervisory Information

A non-U.S. bank and its New York State branch settled separate charges with the Federal Reserve Board ("FRB") and the New York Department of Financial Services ("NYDFS") for unauthorized disclosure of confidential supervisory information ("CSI") and anti-money laundering ("AML") and related violations.

In the first Order, the FRB determined that the bank "lacked any formal policies, procedures, training, or other internal controls designed to instruct employees regarding how to properly handle CSI or how to prevent the unauthorized dissemination and use of CSI." The FRB found that the bank communicated confidential information including information garnered from supervisory examinations without first obtaining the approval to do so from the regulator. FRB charged the bank with violations of FRS Rule 261.4 ("Prohibition against disclosure") and FRS Rule 261.20 ("Rules Regarding Availability of Information General").

In the NYDFS Order, the agency found that "a former New York branch employee backdated several compliance documents at the direction of a then-current branch employee and that [the bank] failed to report this misconduct to the Department in a timely fashion" and that the bank "unlawfully disclosed confidential supervisory information to an overseas regulator." NYDFS charged the bank with (i) failing to maintain an AML program ("3 NYCRR § 116.2"); (ii) failing to maintain books and accounts (NY Banking Law § 200-c); (iii) failing to submit a report to the Superintendent immediately upon discovering misconduct" ("3 NYCRR § 300.1); and (iv) sharing confidential supervisory information in violation of NY Banking Law (Section § 36(10) and 3 NYCRR § 7.2.)

To settle the charges with the FRB, the bank agreed to (i) pay a $2,431,956 civil money penalty and (ii) designate an officer to revise its supervisory policies and oversight.

To settle charges with NYDFS, the bank agreed to (i) pay a $32.4 million penalty (offset by the penalty paid to the FRB) and (ii) submit a written plan acceptable to NYDFS "detailing enhancements to compliance policies and procedures, corporate governance and management oversight, customer due diligence requirements, and the handling of confidential supervisory information."