Turkish state-run Ziraat bank under tight grip of Fed

Tolga Tanış WASHINGTON - Agence France-Presse

Ziraat Bank is under the spotlight in the US.

The New York branch of the Turkish state-run bank Ziraat is now under an “enforcement action” from the U.S. Federal Reserve, and will be subject to inspections for up to two years to ensure it is complying with anti-money laundering rules.

The Fed 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 puts the branch, which has 10 employees, under considerable scrutiny. Although there is no imminent risk of the branch’s closure, 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.

However, the Fed and DFS have not responded to the plan yet.

Currently, six auditors, three each from the Fed and DFS, are conducting inspections at the branch.

Neither of the parties have released an on-the-record statement about whether the inspections are routine or related to the enforcement action decision made three months ago.

Meanwhile, exactly what triggered the enforcement action is still unknown, with the lender denying that any extraordinary or suspicious acts were discovered.

Ziraat is one of the few 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.