Turkish state bank downscales in New York under Fed grip
Razi Canikligil - NEW YORK
Ziraat is one of the few Turkish banks in the U.S. that transfers money through its U.S. operations
The Turkish state-run bank Ziraat has notified its custormers that its New York branch, which recently came under an “enforcement action” from the U.S. Federal Reserve, will close all retail accounts by December 31.Although the bank's letter, dated Nov. 6, says the "temporary" action is being taken to "update the IT infrastructure," Hürriyet has learned that the branch will no longer serve to retail customers, while continuing its corporate banking activities.
The Fed had announced on July 4 that the U.S. Central Bank, Ziraat Bank and the New York Department of Financial Services (DFS) inked a 20-article deal on June 25 obliging the Turkish lender to submit an “acceptable written plan” against money laundering within two months.
Along with the preparation for an action plan, the branch and the bank were tasked with hiring an independent consultant to conduct a review of its New York branch’s U.S. dollar clearing transaction activity from July 1, 2012 to Dec. 31, 2012.
The deal had put the branch, which has 10 employees, under considerable scrutiny. It allows the Fed to watch all of the lender’s actions closely for up to two years.
According to information received from the authorities, the lender fulfilled all of the requested tasks before the Aug. 25 deadline and submitted the plan it had prepared along with the name of the auditor it hired.
Turkish Deputy Prime Minister Ali Babacan said on Nov. 7 that the Fed had sent an inspection team to Ziraat New York's branch on Sept. 8 and the inspection was completed on Sept. 26. Babacan stressed that none of the banking activities of the branch was restricted as a result of inspections.
Exactly what triggered the enforcement action is still unknown, with the lender denying that any extraordinary or suspicious acts were discovered. A source, however, told Hürriyet that the bank "struggled to give an explanation to the Fed regarding certain accounts linked to Turkey."
Ziraat is one of the few Turkish banks in the U.S. that transfers money through its U.S. operations and it is thought that the inspection may concern a money transfer of this kind that was conducted within the defined time interval.
The Fed had only said the bank and the branch were taking steps to address deficiencies relating to its risk management and compliance with applicable federal and state laws, rules and regulations relating to anti-money laundering.