Compliance Oversight Cost the ICBC $32 Million+: Here’s How It Could Have Been Avoided
Mar 2024
5 minutes

Compliance Oversight Cost the ICBC $32 Million+: Here’s How It Could Have Been Avoided

In January of 2024, the Federal Reserve imposed a US$32.4 million fine against the Industrial and Commercial Bank of China’s (ICBC) New York branch. 

The reason? Severe deficiencies in the bank’s anti-money laundering and compliance programs. 

On top of this penalty, the Federal Reserve fined the bank a further US$2.4 million for “alleged unauthorized use and disclosure of confidential supervisory information.” 

While the New York State Department of Financial Services (NYSDF) conducted an examination in 2023 that deemed the ICBC’s new compliance program adequate, the bank could have avoided these hefty fines altogether with the right internal monitoring and reporting channels in place.

Let’s consider what went wrong with the ICBC and how a comprehensive whistleblowing strategy could have helped the bank resolve its compliance issues before landing major fines. 

Where Did the ICBC Go Wrong?

Taking a closer look at the Federal Reserve and NYSDF cases against the ICBC, we can identify several significant problems that led to the massive penalties:

  1. The ICBC failed to correct deficiencies in AML processes, sanction screening processes, corporate governance, management oversight, customer due diligence, and suspicious activity monitoring and reporting. 
  2. The deficiencies listed above continuously appeared on multiple Fed and NYDFS examinations. 
  3. An ICBC employee backdated Know Your Customer (KYC) documents and had these documents signed by a manager no longer employed at the bank.

On the third problem specifically, reports indicate an internal whistleblower alerted the bank of the scheme in 2017 — however, the bank failed to notify the NYDFS until 2018. 

How Could the $32 Million ICBC Fine Have Been Avoided? 

Reports of an internal whistleblower demonstrate a potential lack of accountability within the ICBC’s business structure that led to the fines. 

These fines could have been avoided if the ICBC had not only taken whistleblower reports seriously but also ensured that those reports were communicated to regulatory authorities immediately. 

A robust whistleblowing strategy empowers bank employees to report misconduct, enabling early detection and prevention of compliance breaches. Had the ICBC embraced this proactive approach, it could have mitigated its regulatory violations before they escalated into an investigation. 

By fostering a culture of accountability and transparency, banks can address issues internally, demonstrating cooperation with regulatory authorities. Proactive and timely reporting also aids in conducting thorough investigations, facilitating swift corrective actions to remediate any violations. 

Ultimately, an effective whistleblowing framework could have spared the ICBC — and the lack thereof serves as an important learning moment for financial institutions around the globe. 

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