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Bank of Montreal’s U.S. Unit Cited by Fed on Risk

May 17 (Bloomberg) -- The Federal Reserve announced an enforcement action against Bank of Montreal, Canada’s fourth-largest lender by assets, for “deficiencies” in compliance with anti-money laundering and Bank Secrecy Act rules and regulations.

Examiners at the Chicago Fed discovered the deficiencies at Bank of Montreal’s U.S. branch. The Fed said today that the bank “lacked effective systems of governance and internal controls to adequately oversee” compliance with anti-money laundering rules.

The enforcement action calls on the Toronto-based lender to review the effectiveness of its compliance program and “remedy deficiencies.” Bank of Montreal operates a U.S. consumer lending business in the U.S. Midwest through its Chicago-based BMO Harris Bank unit.

“Our remediation activities are well under way,” Paul Deegan, a bank spokesman, said in an e-mailed statement. “BMO is fully committed to the highest standards of regulatory compliance with the Bank Secrecy Act and anti-money laundering requirements and expectations in each of the jurisdictions in which we operate.”

Fed enforcement actions range in severity from formal warnings telling banks to improve their compliance to more harsh penalties such as cease-and-desist orders and monetary fines. Last year, London-based Standard Chartered Plc was ordered to pay a $100 million penalty by the Fed for “unsafe and unsound practices” related to compliance with the Bank Secrecy Act and London-based HSBC Holdings Plc received a $165 million fine.

To contact the reporters on this story: Joshua Zumbrun in Washington at jzumbrun@bloomberg.net; Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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