Pakistani and Chinese banks under scrutiny for violations of anti-money laundering laws

Sri Lanka's agency responsible for countering money laundering and terrorism financing has levied penalties against Pakistani and Chinese banks for breaching sensitive financial regulations. MCB Bank Pakistan and Bank of China have each been fined LKR 1 million for failing to comply with the Financial Transactions Reporting Act (FTRA). These banks, along with others from Pakistan and China, have been under scrutiny for violations of foreign transaction rules.

The Financial Intelligence Unit (FIU) of the Central Bank of Sri Lanka imposed the penalties on MCB Bank Pakistan and Bank of China due to the "nature and gravity of relevant non-compliance." According to the FIU statement, the banks failed to report Electronic Fund Transfer (EFT) transactions exceeding Rupees One Million (LKR 1,000,000) or its equivalent in any foreign currency, as required by the FTRA.

In 2020, France sanctioned Bank of China following a lengthy investigation that exposed its involvement in money laundering activities. The investigation revealed that the bank manipulated large cash receipts from the sale of smuggled goods using false invoices, allowing 28 merchants and intermediaries to evade taxes. The Bank of China, which used accounts in its Zhejiang region branch for these transactions, was indicted for money laundering and tax fraud. The investigation is ongoing, but the Bank of China paid a fine of Euro 3,000 for its involvement.

In July 2024, Bank of China was also fined USD 20,196 in Malaysia for failing to obtain prior approval from the central bank for modifications to its outsourcing arrangements. The fine followed a review that identified gaps in the bank's oversight of its outsourcing activities and internal policies.

The Agricultural Bank of China, a government-run entity, faced scrutiny in 2016 from US authorities over money laundering and hiding suspicious transactions. The bank's weak compliance program was deemed a significant risk, as it failed to prevent terrorist groups, parties from sanctioned nations, and criminals from using its services for illicit activities. As a result, the bank was fined USD 215 million for international wrongdoing, and its non-transparent transaction methods were exposed.

In 2022, US regulators imposed a USD 35 million penalty on the National Bank of Pakistan for compliance and anti-money laundering violations. The National Bank had allowed serious deficiencies in its New York branch to persist despite repeated regulatory warnings. This led to Pakistan being placed on the Financial Action Task Force's (FATF) "grey list" for deficiencies in its counter-terrorism financing and anti-money laundering efforts.

MCB Bank, headquartered in Lahore, has faced similar violations before. In 2024, it was fined PKR 52.9 million in Pakistan for violating regulatory instructions and failing to comply with foreign exchange transaction regulations. The bank was instructed to improve its internal processes to prevent future violations. Despite these efforts, similar infractions have been reported again.

In 2017, Pakistan’s Habib Bank Limited (HBL) was penalized for violating multiple US laws, including the Bank Secrecy Act (BSA), Anti-Money Laundering laws, and non-proliferation sanctions. The recent Sri Lankan penalties have once again highlighted violations of anti-money laundering regulations and non-transparent business practices by the Bank of China and MCB Bank Pakistan.