UPDATE 1-Fed tells Bank of Montreal to fight money laundering harder

Fri May 17, 2013 11:43am EDT
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By Emily Flitter

NEW YORK May 17 (Reuters) - The U.S. Federal Reserve Board said it has told Bank of Montreal to step up efforts to detect and prevent money laundering at the Canadian bank's Chicago branch.

The warning puts Bank of Montreal in a growing category of financial institutions under pressure to do a better job of adhering to strict U.S. requirements for identifying potentially illegal activity by their customers.

The Fed entered into a written agreement requiring Bank of Montreal to strengthen its compliance after a recent inspection by the central bank's examiners found deficiencies in Bank of Montreal's anti-money laundering program. The Fed made the agreement public on Friday.

A spokeswoman for the Fed declined to describe the problems it found, saying its policy prohibits discussion of specific institutions.

"Our remediation activities are well underway," said BMO spokesman Paul Deegan. "BMO is fully committed to the highest standards of regulatory compliance with Bank Secrecy Act/Anti-Money Laundering requirements and expectations in each of the jurisdictions in which we operate."

The agreement said the Fed found Bank of Montreal's Chicago branch "lacked effective systems of governance and internal controls to adequately oversee the activities of Bank of Montreal's U.S. operations with respect to legal, compliance, and reputational risks."

Banks operating in the United States, whether they are American or foreign, must closely monitor customer activity for signs of money laundering or other illegal acts. They must report unusual behavior in the form of "suspicious activity reports" to the U.S. Treasury Department.   Continued...