Magazine article American Banker

U.S. Cites Lax Launder Policy at India Bank

Magazine article American Banker

U.S. Cites Lax Launder Policy at India Bank

Article excerpt

In an aggressive action that some observers called an escalation of the U.S. government's effort to crack down on money laundering, regulators on Wednesday imposed $7.5 million of fines on a bank partly owned by the government of India.

The Bombay-based State Bank of India is that country's largest commercial bank, with more than 9,000 branches throughout the country and $59.5 billion of assets. According to information posted on the bank's Web site, the Reserve Bank of India, the country's central bank, owns 59.7% of its stock.

The regulators' willingness to go after a bank with such close ties to the Indian government, particularly at a time when the United States is trying to maintain support in central Asia for the war in Afghanistan, surprised some.

"This is very significant. I am not aware of any precedent for it," said Stuart E. Eizenstat, a former deputy Treasury secretary in the Clinton administration and now a partner with the law firm Covington & Burling.

"The fact that administrative action of this kind is being taken, particularly considering that it is state-owned and that the Secretary of State was just there assuring them of our friendship, I think is a significant ratcheting up of interest in money laundering," he said.

Federal regulators refused to elaborate on the consent order, except to say that it was not influenced by the government's war on terrorism. The order, which regulators released Wednesday, applies to the State Bank of India's three branches in New York, its branch in Chicago, and its agency office in Los Angeles.

State Bank of India agreed to pay the Treasury $3.75 million to settle charges that its five U.S. offices were guilty of "reckless engagement in unsafe and unsound practices" because of a failure to establish required anti-money-laundering safeguards. …

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