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Bank tied to 'Panama Papers' firm to be investigated in Taiwan

Monday, August 22, 2016 - 10:57

[HONG KONG] Taiwan's government will probe a bank that was fined US$180 million for violating anti-money laundering laws by a US regulator, which described its compliance program as a "hollow shell".

Taiwan's Financial Supervisory Commission will investigate Mega International Commercial Bank Co, the agency said in a statement on its website on Sunday. Shares of Mega Financial Holding Co, the bank's parent, plunged as much as 6.9 per cent in Taipei on Monday.

Suspicious transactions flowed between the bank's New York and Panama branches and a substantial number of customer "entities" were apparently formed by Mossack Fonseca, the Panama law firm at the centre of the "Panama Papers" scandal, the Department of Financial Services in New York said Friday.

The disclosure this year of documents leaked from Mossack Fonseca drew attention to how the world's rich can use offshore shell companies to hide their money and led to political fallout including the resignation of Icelandic Prime Minister Sigmundur David Gunnlaugsson.

The 11.9 million records led to articles alleging that secret companies were used by money launderers, art smugglers, international criminals and repressive governments like Syria's.

The lender's head office was "indifferent toward risks associated with transactions involving Panama, recognised as a high-risk jurisdiction for money laundering," the Department of Financial Services said.

As part of a consent order agreed by the regulator and the bank, an independent monitor will be appointed to "address serious deficiencies within the bank's compliance program and implement effective anti-money laundering controls," the regulator said.

The bank was described by the Department of Financial Services as a "major international financial institution," with about US$103 billion in assets, including US$9 billion at its New York branch.

In a stock exchange statement on Friday, Mega Financial said that the fine for the unit was "bearable" but would hurt earnings this year.

The regulator's examination of the lender's New York branch took place in the first quarter of 2015 and was "extremely troubling," according to the consent order.

Mossack Fonseca has said that its work has been misrepresented; that it conducts due diligence on its clients on an ongoing basis; that it denies services to clients who don't comply with information requests or have been sanctioned by authorities; and that it cooperates with authorities in investigations.

BLOOMBERG

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