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Commerzbank Ordered to File Anti-Money-Laundering Plans

Oct. 17 (Bloomberg) -- Commerzbank AG, Germany’s second-largest lender, will take steps to improve anti-money-laundering controls at its New York branch under a U.S. Federal Reserve order citing lapses in its correspondent banking business.

The Frankfurt-based company agreed to submit a written plan to the central bank for enhancing the branch’s compliance with requirements including those of the U.S. Bank Secrecy Act, the Fed said today in a cease-and-desist order. Commerzbank agreed to the order without admitting or denying wrongdoing.

U.S. regulators, including the Fed and the Office of the Comptroller of the Currency, have been citing some of the world’s biggest banks for lax controls over transfers that could allow terrorists and drug rings to move money around the globe. Lenders including Citigroup Inc., JPMorgan Chase & Co. and HSBC Holdings Plc have been told to tighten oversight.

“Commerzbank is fully cooperating with the Federal Reserve on this matter and is committed to satisfying the terms of the agreement,” Margarita Thiel, a spokeswoman for the bank said in an e-mailed statement today.

As part of its agreement, Commerzbank will hire a consultant to perform a review of U.S. dollar clearing transactions from May through October last year and report any suspicious activity, the Fed said.

Renewed Focus

Regulators have pushed for renewed focus on fraud and corruption protections, saying banks’ attention to safeguards was diverted in the wake of the 2008 financial crisis. The U.S. fined London-based HSBC Holdings Plc $1.9 billion last year over claims Europe’s biggest lender gave terrorists and drug cartels access to the U.S. financial system. Standard Chartered Plc agreed to pay $667 million to resolve U.S. regulators’ claims that the company violated Iran trade sanctions.

The HSBC violations drew a $500 million fine from the OCC, the agency’s biggest-ever sanction. The agency also pursued several enforcement actions similar to today’s order against Commerzbank that demands new methods inside the bank.

Within the last 18 months, regulators have ordered JPMorgan, the biggest U.S. bank by assets, and Citigroup to bolster money-laundering safeguards, without issuing fines or demanding admissions of wrongdoing. Comptroller of the Currency Thomas Curry said in congressional testimony this year that he’d like more power to eject bankers from the industry for knowingly skirting rules.

In 2010, Wells Fargo & Co.’s Wachovia Bank unit agreed to pay $160 million to resolve a criminal investigation into drug cartels’ use of the bank to launder money through Mexican exchange houses.

To contact the reporters on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net; Jesse Hamilton in Washington at jhamilton33@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Maura Reynolds at mreynolds34@bloomberg.net

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