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UNITED STATES OF W N C A
BEFORE THE
BOARD OF OOVERNORS OF THE FEDERAL. RESERVE SYSTEM
FEDERAL DEPOSIT I N S W C E CORPORATION
NEW YORK STATE B A " 0 DEPARTMENT
IntheMaucrof
1
S T A Z BANK OF INDIA
Mumbai,lndia
STATE BANK OF INDIA
BROADWAY BRANCH
New Yo& NY
STATEBANKOFINDIA
FLUSHINQ.BRANCH
FlWhin&NY
STATEBANKOFINDIA
PARKAVENUEBRANCH
NeorYo&NY
STATEBANKOFlNDSA
CHICAGOBRANCH
chioago. IL
STATEBANKOFINDLA
LOS ANffELES AQENCY
Lor An@%, CA
WHEXEAS. in mgnitioa oftheir common goals to e n m complirmce with
applicable fidrrnl and state laws, rules, and regulations by all ofthe U.S. opmkmsofthc !We
Bank of W i M~rnbai,India (the "
B
m
a
,nd to effectively manage the bnancial, operational,
Icpl. r r p d o d , and compliance risks ofthe US.operations ofthc Bank, the Board of
governor^ of the Federal Reserve Syswm (he“Board of Governors”), the Federal Deposit
Insurance Corporation (the “FDIC”),
and the New York State Banking Department (the “New
York Dcp-”)
(collaclively the USU~CMSOK”), the Bank,its Broadway Bmch in New
YO& New York, its Park Avenue Branch in New Yo& New Yo&, its Flushing B m c h in
Flushin&New Yo& (the Broadway,Pa& Avenue, and Flushing, New York Branches,
CoUectively the “New Yo& Branches”), and the Bank‘s Chicago Branch m Chicago,Iuinois (the
“Chi~agoBranch’’) (each a “Branoh” aud, collectively,the “Branches”), and the Bank’s Los
Angeles Agency (the “Agcncy”)(colleotivcly the Bank,thc Branches, and the Agency an
r e f e d to IS YSBI-US”) have m d y ogmd to the isslliince of this combined order to Cease
and Wirt and order of Asseument of a Civil Money Penalty and M o m Payment lssutd
Upon Consent (the “Order“);
WHEREAS, IInumber of de6ciencies nnd violations of law have been identified in the
Bank‘s U.S. optrstionS,and SBI-UShas acknowledgedthe need for immediate cornc~wa d o n
and intends to take the steps necessary (1) to enhance and impmvc the US.opaations’
management ovenight, internal controls, audit standards, and customerdue diligence pmtices,
and to enhance and improve policies and proccduns for compliance with the Cumnoy and
Foreign TransaOtions Reporting Act (31 U.S.C. 53 11 & a.
a)
nd the accompanying regulations
issued bytheU~.DtpartmrntoftheTrrasury(31CFR. 103.11 ~~.)(collectivelyreferradto
as the Bank Scmcy Act (the “BSA”)) and the N~CS and regulationsofthe Wce offoreign
AsKO Control ofthe US.Dcpmmcnt of the Tmsury (”OFAC”); (2) to ensure full compliance
with suspicious&ily
roporhgand BSA compliance rcqukmmts ofthe Board of OOvemoS
and the FDlC(12 C.FR.208.62,21124(9, and 326.8 and 12 C.F.RPart353)and 3 N.Y. Comp.
2
codes R & Regs. Put 300.1 relating to reports required to be made to the New Yo&
DepsrtmenC and (3) to ensun full oompliancc with dl applicable state law, including the New
York Banking Lsw and related rrgulations and the New Yo& Abandoned Propem Lay
WHEREAS, pursuant to section 80) ofme Federal Deposit I n m Act, as amended
(the T D I Ad’), 12 U.S.C. 1818(9, the Board of Governors and the FDIC ~ I Cjointly assessing a
civil money penaltyof S3.750,OoO against SBI-US f
ixSBI-Us’sapparentviolations of 12 CFR.
326.8 ofthc FDIC’s NICS and regulations and for SBI-US’Sapparent engagementinmsafe and
M S O p
~
d w s Elated to SBI-US’S6pil~11?to establih and d
t
&pf~ccdurtsn e~bnably
designed to assure and monitor compliance with the BSA and SBLUS’s Mum to maintain
wmct and complete books and records,
WHEREAS, purmant to the New York Banking Law Section 44, the New Yo&
t k p a e n t is wkcting 8 monetary payment of $3,75O,OOO on behalfofthe pwpk ofthe state
ofNew York for apparcnt violations ofthe New York Banking Law Sections 200c,204,and
672 relatingto SBI-US’S obligationto maintain a c c w e boola and m r d s and
3 N.Y. Comp. Codes R & Regs. Paxt 300.1 relatingto reports requid to be made to theNew
Yarlr
and
WHEREAS,onOctobcr30,2001,thebod ofdirectorsoftheBankadopteda
resolution:
3
(1)
authorizing and directing Mr.P.K. Sarkar. Dy.Managing Dinctor &
Group Executive (lntundonal Banking) to enter into this Order on behdfofthe Bank each
Branch, and the Agency and consenting to complisnoc by the Bank, each Branch, the Agency,
and their institudon-affili parties, as defined m
xctions3(u)and 8(bX4)oftheFDIAct,asamended(12 U.S.C.1813(u)and 1818@)(4)),With
each and every provision of this Ordec and
(2)
wniving any and all rights that the Bank. each Branoh. and the Agency
may have pursuant 10 12 U.S.C. I818 or sections 39 and 44 ofthe New Yo* B d n g Law:
(a)
to the issuance of a notice of charges and ofhwing and a notice of
assessment of a civil money penalty on any matter set h di~
n this Order;
@)
to a hearing for the purpose oftakii evidence on any mattem set
(0)
to judicial d e w ofthis Ordq and
(d)
to challenge or contest, In any manner, the basis, iUumce, validity,
foahin misode&
terms, etfectveness or enfonesbilityof this Order or any provision hemof.
NOW, THJ3EFORE, before the taking ofmy testimony or adjudication 0%or finding on
any issue of faot or lawherein, and without this Order constitutmg an admission or denial of any
allegation made or implled by any ofthe Supervisorsin connection with thLq procadin& and
solely for the purpose of settlement ofthis proceeding without protmted or extended hearing or
testimony and pursuant to the &resaid lesolutions:
4
IT‘IS HEREBY ORDERED that, whcs applicabk, the Bank,each Branoh, the Agency,
and tach of their institutian4liated parties ceape and desist h m committing any vlolatiom of
the M
~ Idescribed
J ~
herein, and shall take afsrmative action as bllows:
ComDrcheDsivc Rwiew
1.
(a)
W
i
t
h
i
n 30 days of this order, the Bank shall engage a gualified
independent fim acceptable 10 che SupcMrars (the “Independent Firm”)to oonduct a
comprehensivereview of the Bank‘s U.S. opedous, ad to assist in the developmentof policies
and procedures designed to ensure that SBI-US conducts its U.S.activities in a safk and sound
manner and complies with all applicable federal and state laws and ngulstionr. Thc
c o m p n ~ v review
e
shall address, at a minimum,the management structure and oversight of
the Bank’s U.S.operations;intemal controls; risk managcmcnt; internal audit fundon; policies,
ploeedurrs, and controls for compliance with applicable federal and state laws and regulations
(including BSA and OFAC compliance); customer due diligence; identificationand q o r t h g of
suspicious aclivity; rrgulatory reporting;and handling of abandoned property.
(b)
With mpcot to the New York Branches:
(i)
Punuant to Part S of tbe General Regulations ofthe Banking
Board, 3 N.Y. Comp. Codes R.& Regs. Paa 5 (,”Part 5 9 , the Independent Firm shall (A) isme a
report on the balance sheet and accompMying disclosures, inchding off-bahce shed amount3
and assets held on behalfof othem, IS of June 30,2001, fbr eachof the New Yo& Branches and
a consolidating balance shcet and accompanying disclosures, including off-balance sheet
mnotmtsand ruscts heldonbehalfofothers,asofJunc 30,20Ol,firtheNewYorkBnnches,
end @) provide an attestation by t& Manager of each ofthc New Yo& B a c k and by the
5
Resident aad Chief Executive officer and Country Manager,U S A , with ~speotto the New
York Branches, regarding the effkctiveaeu of each o f the New York Brsnohes' internal control
smcturc overbnanclal reporting, based on rwonablc criteria established by SBI-US. The
report and attestation shall comply with the s t a n d d s set forth in Puts 5.3(ax1) and (2).
respectively. Coincident with the rcportr issued pursuant to Parts 53(aX1) and (2), the Branch
Manager of each ofthe New York Branches and the President and ChiefExedve Officer and
count^^ Manager, U.S.A., with rcspact to the New Yorlc Branches, shall a~wt
SBI-US'S
comp~ianccwith applicable laws and re&tions in accordancewiihthe rnquhcmmts ofpart 5.5.
Within 120 days ofthis Order, thereport,the attatation, and managemant's assenions shall be
i
d to the Now Yo& Deparhnent, the board of dimtors ofthe Bank and the head office
inspeclion dc-ent
for the Bank, with a copy to be delivered to the FDIC and the Federal
R e m Bank of San Flancisco (the "Sen Fmncisco Resewe Bank").
(ii) Pursuant to Part S3(e), the IndependentFirm shall pmvide formal
munagemcnt letten containing findings md recommendntions to improve finaDdal intam1
conmls and shall include management's rrsponre to each momendation. Withm 120 dap of
this Order, copies of the Independent Fm's management leatrr, together with management's
nsponse, s M 1be provided to the board of d b r s ofrhe Bank and the head office inspection
departmat of theBank,and to the FDIC,New Yo& Depc\ltment, and the San F m i s c o Reserve
Bank.
(c)
Within 10 days ofthis order, but prior to the retention of the Independent
Finn, rhe Bank shall mbmlt to the Supervisors an "ptable engagemem letterthat delineates
the mpe ofthe comprehensive review and the Part 5 complianceprocodurcs The engagement
letter shall provMe that the lndcpcndcnt Fbn will have complete access to all employees, books.
6
records,and documents (imcluding but not limited to all financial and legal documentationand
communications) ncceswy to conduct the review. The engagement letter shdl also provide that
(i)
the Independent Firm will exercise its bcst efforts to complete the comprehensive rwiew
within 120 days, Gi) a copy of the Independent Fm’s written report of its 6ndmgs end
recommendationswill be provided to tbe Supervisorsdthe same time that it is provided to the
Bank, (iii) all information including, but not llmited to, work papm,programs and proceduns
related to the comprehensivereview shall be provided to the Supenisoaby the Independent
Finn upon quest, and (iv) if at my time the Independent Finn believes hat infbnnatjon is not
being provided by SBI-USto enable the firm to conduct its review, the Independent Firm must
immediatelynow the Supervisorsm writing.
b m e d h t e Rutrldiolu 8nd Interim PoUdes md P
2.
dU W
Beginning 10 days fbm the date of this Order, the Bmnahes and the Agency shall
not,with respect to thc d e m e n t endtkd ‘Won-ResidentIndian” 0,
accept my funds for
W
w outside the Unlted States, by drift or win tmsfcr, if the customer of the NRI
dcpattmcnt does not maintain a deposit accoullt with SBI-USin the United stat#, unless SBI-
US (wben acthg 8s the onghator’s bank) first verifies the identity of the Itminer, and (when
acting IS the bemficiay’s bank) obtains infomration regding tho bemficiq inacoordancc
with acoepted ‘‘Wlaneed Due Diligence“ (”EDD”)
practices (obtaining adequate identifjhg
information thaf is rppmpriatdy reviewed and that remainsreadily retrievable by a Bmch or the
Agency,understanding rbe nOrmal businessactivityof its customers, and monitoring eansactions
as appropdatc), snd othenvise complies with 31 CFR.103.33. In addition, prior to effecting
any such -r,
the Bmches and Agency must conduct OFAC scrrening using i n d u s q
1
standard c o m p l i i softwan and take whatever other actions BR necessq in order to ensure
thar any nanrfir does not violate OFACd e s and regulations.
3,
Beginning 10 days h m the date of this Order, the Branches and the Agency shall
not accept new funds h m an NRl depamnent customer for transferto MYof his or her SBI-US
or other bank account@ outside the United Stntes unless the Branch or Agency b
t verifies the
Identity ofthe romiuer in accordance with accepted EDD practices (as described in paragraph 2
hereof). In addition, prior to efkting my such deposk, the Blanches and Agency must conduct
OFAC screening using industry-standard compliance toftwnc and take whatever other actions
are necessary in order to ensure that any transfer docs not violate OFAC N
4.
~ and
S regulations,
W
i
t
h respect to the 27 accountt which, as of Januay 24,2001, SBI-UShad
)'
on the books ofthe Park Avenue Branch, with respect to the 16
identified as ' k s c m ~llccountf
additional accounts subscqucntly identified by examines as "nom-o"or "CscroM"accounts on
the book ofthe Park Avenue Branch, and with mpcct to MYother accounts that serve a similar
p u p s e or function and about which a follow-up request k r Momdon wbs issuedto SBI-US
by the Federal Reservc Bank ofNew York (the "New York Reserve Bank") (the "Escrow
Accounts~,the B a d shall, within 30 days ofthir orda:
(a)
have sent d i m 9 to the supcNisorsdocumentary evidenceestablishing
formal and appropriate approval of each o f the b m w Accounts; and
(b)
provide copies ofexecuted account agreements and supporting EDD
documentdon fix each oftbe Escrow Accounts.
5.
Within 10 days ofthis Order, the Bank shall provide to the SupcMson the 111
names and addresses of the bcnc6cial owners of all of the accounts that we= the subject ofthe
M m h 22,2001 information roqucst submitted by the New York Reserve Bank to the New Yo&
Branches.
6.
Beginning 10 days h m the date of this Order, the Branches and the Agency shall
not acoopt for deposit or collection any officialchecks or drafls drawn on any Bank branches or
agencies worldwide if either tbc payee or endonemcnt informationha9 sny material altaalion
7.
Notwithstanding the provisions of paragrephs 2 through 6 h e m q until (a) SBI
US submits to the Supervisors acceptable interim policies and procedum designed to ensure
that (i
the
)Branches and the Agency only enpge in transactions with account holders or other
transactors who have provided SBI-US with adequate identifying information that is
~ p ~ p r k t=viewed
~ l y and that &r ~ d i l yE ~ t V a b l bt y SBI-US, (ii) SBI-US has SYSWIIS
in placc to assure the transpmncy of its boob and mods, @) SBI-US has systems in place to
assue tha~
the Supervisors, thug$ the normal supervisory proctss. can determine the financial
condition of the Branches and the Agency and the details and purpose of any transaction, and
(i) all palties to tmnsa&o'
rn conducted at, by, or through q y Branch or the Agency am
identified in accordance with OFAC regulations and (ut in full compliance therewith,and (b)
SBI-US implements such intaim policies and proceduresto the satishaionofthe SupcMsors in
aco~rdanocewith the pmvisions o f psrsgraph 23(c) hereof, SBI-USshall nor opm any new
account in the Unittd Statts.
9
wrnrremea
8.
by ph-
(a)
Within 30 days of receipt of the repon of the Independent Firm mquired
I h e m s SBI-USshall submit to the Supervisors an acceptable Written p h to
coordinatethe management ofthe Bank's U.S.operations (including the Nassau Branch to the
extent that its operations 81e managed in the Udud States) and to develop a US. managcmcnt
mcture that is suitable to SBI-US'S business needs. The plan shall, at a minimum:0)include
the appointment of Isenior Bank officialto be responsible for all of the Bank's U.S. operations.
(ii) include the cbntinucd employment or the appointmentof an experiencedmanagementofficial
M l i u w i t h U.S. banking practices with authority and responsibility in the United St&es for all
of the Bank's U.S. operations, Qii) provide that the Branches and the Agency at adequately
staffed by qualified and trained personnel who have the ability to restore and maintab all
opedons of me Bmches and the Agency to a safe and sound condition end comply with the
requirementr ofthis Order, (iv) include the appointment of an experienced head auditor and
compliance ofiocr for US.operations, and (v) provide that d1senior U.S.officials appointed in
nmxdance with this paragraph are given 111 authorityto cfllct a l l neccsssry conrctions
required by this Oda.
(b)
Notwithstandingthe provisions of paragraph 8(a) hereof. within 60 days
of this Order, SBI-USshall appoint a qualifiedsenior oompliance of6ocr who is acceptableto the
Supefison. The compliance officer shall, at a minimum, be responsible for the coordination,
supemkion, and monitoring of the combined operations of the Branches and the Agency. He or
she must possess the appropriateexperience, Wining, and authorityto ovescethe Branches' and
the Agency's compliance function. and be provided with such other staffas he or she deems
10
necessary to oarry out the compliance o5cer’s duties and responsibilities in an effective and
efficient manner.
Internal Controb
9.
W f i n 30 days ofreceipt ofrhe report ofthe Independent Fm
i rcquirtd by
p w h 1 hereof; SBI-USshall Submit to the SUP~~V~SOJS
acceptable pOllOic~and PrOCedWs
designed to impve mtemal contmls at the Branches and the Agency. The policies and
procedures shall include steps to. dt a minimum:
(a)
strengthen internal accounting and rtcodkeeping functions, including
maintenance of c w n t and ~ccuratcaecaunt rtcords and reconciliation of accounts;
(b)
enhance management information systemsto ensw that appmpriatc
management personnel receive timely and accurate reports nectssaty to effactively monitor and
manage risks and appmphte compliance and audit resourns to detect and c o a t weslaresses
and deficiencicr;
(c)
with m p t to any account(s), whether used for intcr4icc or settlement
or otha purposes, the funds of which move to, h m ,or through any Branch or tbe Agency,
hcludhg the account entitled “India Dollar Account” (the “IDA”):
(i)
itemizeall product types aod instrumentsthat move h u g h such
(ii)
prepare a comprehensive, detailed and transparem mapping,
accounts;
including offsetting entries, for all accounts that ultimately flow into or through the lDA or any
similar clearing account;
11
(i)
maintain in the United States a daily. complete reconciliation of
these accounts on a sameday basis;
(iv)
prepare and mainmin in the United States a complete, transpannt,
and auditable aging schedule;
(v)
ensun that the current pmtict of overdrawing the IDA, or any
similar clearing aooount,to pay drafts or other items ceases;
(vi)
maimdin in the United States full, complete. tmsparent, and
nfennced daily aging schedules of all outstandingand open SBI-US originated items, which
comply with New York State and other escheEamt requircmcnts;
(vii)
maintain, for a period of seven yeas, in the United States originals
or auditable high quality copiesofthe fkont and backofall cleared and processed official checks,
drafts or other i n m e n u that m issued, paid, or proctsscd in the United States by the Bank's
branches. agencies, or correspondents; and
(viii) maintain full and complete information for all electronic funds
transfW going through the IDA that provides SBI-US with a complete audit t
d for each
p d c u l a r bansfcr fm a period of six ycars,
budh Proenm
10.
SBI-US shall continue to develop and improve its intemal audit program. Within
30 days ofthis Order, SBI-US shall submitto the Supervisorsan acceptable Written intemal audit
program for each Branch and the Agency. The internal audit pmgtam shall. at a minimum:
(a)
provide for procedures consistent with the Institute for lntcmel Auditors'
Standards for the Professional Practice of I n t d Auditing;
12
(b)
identie each operational area to be r e v i e d and the scope of reviow.
(c)
include procedures to msurc the independenceof the d i function of
tach Branch and the Agency, including appropriate escalation ptocols;
(d)
nquh demonseation that the prior year's internal audit activities and the
proposed audit progtam fixthe foUowing year are rcvicwed at lean annually on an ongoing basis
by the Bank's head office audit committee or equivalentto ensure thattbe audit p g n m is
revised in a manner to reflect changes in SBI-US'S oFganizational and business envkonment,
including the adoption of the most cumot industry best practices;
(e)
q u i r e risk dssessmcnts to identify high risk areaq and to ensure that
ongoing internal audits o fcriticalor high-riskm.as are performed with reasonable fbqucncy and
depth, and that h e adequacy, eMveness, and efficiency ofthe i n t e d contml environment of
tach fhction m reviewed;
(f)
include reviews ofeach Branch's and the Agency's compliance with
applicable laws a d regulations;
(g)
require reports ofthe intcmal audiior to be bansmittedto and maintained
at the appropMteBranch or Agency BS well as to the hcad o f h inspectiondepartment, and
provide fbr procedures designed to ensure theindependence of each Bmcb's and Agency's
audit fuaction;
(h)
provide guidelines and the designntion ofresourcosto ensure thaf intanal
audits an completed effectively and a3 scheduled;
(0
provide for the submission offomd written reports d i m l y to the Bank's
head 0f6ce hqcction depattmm and to the Bank's board of dmbm or a designated audii
committee theme and
13
0)
establish 8 process to monitor the status and ensure effective follow-up of
corrective action taken to a d d m weaknesses identified by audit and compllance pcaonnel, and
establish proocdures to conduct targeted audfi to evaluateremedial action.
p8ak Secracv Act and OFAC ComDliince
11.
SBI-US and its institution-afEliiatod parties, shall not, directly or hdmctly,
violke the BSA or any d e s or ngulsdonsissued p u e n t thnota or any N ~ Oand
S regulations
issued by OFAC.
12.
Within 30 days ofreceipt of the report ofthe Independent Firm required by
paragraph I hereof, SBI-US shall submit to the SuperViSorsan acceptable Written program
designed to ensm and main& compliance by each Branch and the Agency with the BSA The
program shall, at a minimum:
(a)
Provide for the use ofapprophtc sys~~ms
to en~llncompliance with the
recordkeeping and reporting requkments for cumncy transactionS of over SI0O
, OO
(31 CFK 103.22). ineldig the reqUinment to aggregate transaCtionsunder
31 C J R 10322(0). The system3 shall, at a m'hhum, be capable ofaggregating multiple cash
transactions for any one business day h m all Brcmchts end thc A g m y by 8~0011111number, by
m c ( s ) of account holder(s) and by transactor(s).
@)
Ensun compliance with the identificationrequirements rclaad to the
recOdkeephg and reporting requirements for cumncy tmnsadons ofover S10,OOO
(31 CER 103.28).
14
(c)
Provide for appropriate procedures relating to obtaining and retaining
fundstransfer idormation bs required by 31 C.F.R. Paa 103.
(d)
Provide for appmpriate procedures to reasonably ensm that all new
products involving the receipt or transfer of funds comply with applicable laws and regulations
relatcd to BSA compliance and suspicious Sctivity reporting.
(e)
Provide for appropriateprocedws governing the maintenance of"payab1e
through" acumnts, or accounts that in h t i o n or praotice pnsent similar risks, in accordance
with the guidelines set firth in Supeni~o~y
Lener SR 95-10 issued by the Board ofGovemon.
(0
Provide for appropriate procedurcs to detect and monitor all currency and
other txansactionsoccuning at any Branch or the Agency, includii Mu activities invoking
deposh into deposit accounts based in India, to determine whether such tmmacdons IVC b c i
conducted for illegitimatepurposes and that there is fill compliance with all lawsand rrgulations
applicabk to such tmnsactions.
(g)
Provide fix independenttcsting of compliance with dl applicable rules
and regulationsrelated to the BSA and the identification and reportingof suspicioustransa~tion~.
This shall include, at a minimum, ensuring that each Branch and the Agency is complying with
the BSA, that appmpriate personnal at each Branch and the Agency possess the nquisite
knowledge necessaryto comply with the BSA,that all procedwcs an in writing and m
complete and accurate, and thatthe results ofthis testing are reported at qumdy intervalsto the
Bank's head office management. The independent testing shall be conducted by qualified,
experitnce4 independent third parties. such as independent public accountam or consultants.
who are not in MY mauncr afiiliatcd dth the Bank, any Branch, the Agency or any of their
subsidiaries or dliates.
IS
(h)
Requirt that the BSA compliance program for the U.S. operations of the
Bank be managed by a qualified senior officer who possesses the appropriate experience,
trainingand authority to overtet the BSA compliauce and enhanced customer due diligence
progmm, including, without limitation, the identification and timely, accurate and complete
reporting to law enforocmentand supeMsory authorities of unusual or suspiciousd v i t or
~
known or suspected criminal activity perpctmted against or involving the Bank, any Branch, or
the Agency.
(i)
Provide ei�cctivc training to all appropriate pemnnel at each Branch and
the Agency (including, but not limited to, tellers, customer scrvlce representatives. l d k q
O ~ ~ X I Sprivate
,
and personal banking offjcers,employees ofthe limds transfer and check
processing departments, and dl other customer contact pexsonnel) inall aspcct~of regulatory and
internal policies and procedures r
e
l
a
t
e
d 10 the BSA and the identificationand reporting of
suspicious~ ~ ~ S ~
andO
update
I Ithe
Straining
,
on a regularbasis to ensue tha! all personnel
have the most clment and up to date informaton.
13.
Within30daysofreceiptofthertportofthelndepcndentF~1cguindby
pamgmph I hereof, SBLUS shall submit to the Supervisorsan scccptable Wriacn plan designed
to ensure compliance with OFAC regulations (31 C.F.R Pat 500 am.),63 well as any rules
and guideliies issued or administered by OFAC. The plan shall include, a~aminimum,
procedums to ensure thatcustomer eanssctions are screened using indushy-standard OFAC
compliance software and an processed in accordance with a regularly updated lia ofentities and
individuals whose tmsaotions or tissscts are required to be rejected, blocked, hzm, or
monitored.
16
gnbaaced Due DI-
14.
hp-
Within 30 days ofnceipt ofthe rrport ofthe Independent Fm q u i d by
1 hcreog SBI-US shall submitto the Supervisors an acceptable written enhanced
customer due diligence program. The program shall bc designed to rtasonably cnsurc the
identification and timely, acowate and complete reporting ofknown or nrspected criminal
activity against or involving the Bank, any Brwch, or the Agency to law enforcementand
supervisory authorities p9 required by the suspicious activity reporting pro6sions ofthe BS&
RegulationK of the Board of Governors (12 C1.R 21 124), and the rules and rrguldom of the
FDIC (12 CER. Part 353). The enhanced customerdue diligence program shall. at a minimum,
provide:
(a)
Procedures to ensum that all customers an assigned to a specific Branch
or h e Agency, and that when a new account is opened, all oritid informmation is obtained,
accurately and timely entered into SBI-US'S management infonnation system, and remains
readily retrievable.
(b)
For a risk focused assesSII1cnt ofthe customerbase ofeach Branch and the
Agency to:
(i)
identifjthe categories ofcustomers whose tramdons do not
require monitoring because of the routine and u s d naturt of their bankingactivities; and
(ii)
determine the appropriate level o f e n h a n d due diligence
newssay far those categories of customeTs that the Branch or the Agency has ==OD tobelieve
pose a heightened risk of illicit advities at or through such Bmnch or the Agency.
(c)
For those customers whose uanssctionsrequire enhanced due diligcnce,
procedures to:
17
(i)
determine the appropriatedocumentation necessmy to conblm the
identity and business activities ofthe custom,
(i)
understand h e normal and expected transactions ofthe customer,
(iii)
maintain M effective audit trail for executed transactions; and
(iv)
nponsuspicious activities in compliance with applicable federal
and sWe mgulations.
(d)
Procedures to allow SBI-USto identify those accounts CUlTcntly in
existence Eor which SBI-USlacks critical customer data (including,without litation, fidl
names of account holden and beneficial owners ofaccoun&,tax identification numbem,
addmKs and country of origin), and to collect any missing idormation dating to such pocounts
withiin 60 days ofthe receipt ofthe report ofthe Independent Firm.
(e)
Notwithstanding any other provisions ofthis Order, with respect to
accounts b r which critical information cannot be located, procedures for determining whether
such accounts should be closed and for closing them.
(0
Procedures to emm that all accounts are linked on a o n e t o a e basis
with thc lid of customm in each Branch or the Agency's customer file.
(9)
Procedum to e
m the retentionfor a minimum of one year of accessible
on-line bansaction history sufficient to enable SBI-USto monitor eccount activity, and
procedures to ensun retention for a reasonabk pniod oftransaction history of closed BccouII1s.
JadeDendent R d c w of Vanom Accountr and Susuieiaw Activitv Remrtiog
IS.
(a)
W M 30 days ofthis order, SBI-USshall mgage the Independent Firm
or another qualified independent firm acceptable to the Supervisors to conduct a full and
18
complete =view ofthe use by SBI-US of omnibus, suspense and payable through accounts (and
accounts with similar functions used to etfecr funds transfers) and the Escrow Accounts
(collectively, the 'Reviewed Accounts") (the "Second Independent Review"). The Sccond
IndependentReview shall also address SBI-US'Shistorical suspicious activity rcporhg ("SAR'')
policies and procedurcs. At a minimum. the miew shall:
6)
alp transactions booked or conducted through the R d - d
Accounts f b m Janumy I, 1998 through to the present to determine who was SBI-US'Scustomer,
on Wfiosc behalfthe transaction was undertaken, and whether SBI-US'Srecord keeping relating
to the tfaaseoton was transparent and accurate and complete;
(i)
identi@ and investigate suspicious or unusual activities, ifany,
conductedthrough the Reviewed Accounts;
(ii)
asses the necessity and propriety of each of the Reviewed
Accounts. and,where appropxiate,m m m m d that SBI-USclose unnbcwary or ineffdvely
controlled Reviewed Accounts and make appropriate recommendations that m,at a minimum,
designed to achievt compliancewith BSA and OFAC compliance requirements and me fully
documented;
(w)
identi@any U.S.dollardenominated accounts that wrc not
assigned to a specific Branch or to the Agency es of February 12,2001, and identifjthe status
and disposition of such sceounts;
(v)
review SBI-US'S SAR compliance pmgnun 6um April 1596to tbc
prtscnt to detenninc whther SBI-UShad in place adquate policies and procedum designed to
cnsm compliance with the Supervisors' suspicious activity mponing rules; md
19
(vi)
ifthc review required by paragraph IS(aXv) hereofidentifies gaps
in SBI-US's SAR reporting be(b)
1996 and the present, determine thc reasons for such gaps.
To the extent that any of the Reviewed Accounts remain open (or any
similar accounts identified through the review required by paragraph 1S(a) h e m f remain o p ) ,
SBI-USshall submit to the Supenisors, within 30 days of receipt of the report of the Second
IndependentReview, an acceptable written p r o m designed to e
m thatthe remaining
Reviewed Accounts (or similar accounts) Maccurately booked and recorded, and arc efkctively
conboned and monitored for suspicious activities. In the event that the Second Independent
Review includesalecommendationthatone or mom ofthe Reviewed Accounts should be closed
and SBI-USdocs not closc the accouoto, SBI-USshall provide to the Supervisors its written
justification fbr not closing the account@ in the submission lcquired by this paragraph.
(c)
In the went that SBI-USuses the Independent P h to conduct the review
requind by prrpgraph IS(a) hereof. the engagement Idler desm'bod in paragraph I(c) hereof
shall include the leview mquircd by thispmgmph. In the event that SBI-US Ohooses another
firm to conduct the required review, SBI-USshall submit an acceptable engagement letter to the
Supervisors,within I0 days of this Order, following the procedures dcscnid inp m p p h s 1(c)
and 23(a) henof
Jaderwdtnt Tedw
16.
Notwihmdingthe pmvisions ofparagraphs ](a), 1%) and lS(a) hereof within
60 days of this Order, SBI-USshall, in a manner acceptable to the Supcrvisom, provide fox
independent resting of the Branches' and the Agency's BSA, OFAC, customer due diligence,
SAR. and anti-money laundering compliance programs. At a minimum, the testing shall be
20
conducted three months after SBI-USreccives the approval of the Supervisors for each
respective program, and 12 months afterlhe initial testing.
)tezohton Rewrting
17.
Within 60 days ofthis order,SBI-USshall submit to the Board ofGovernors all
F o m FFIEC/OOZS for the Nassau Branch ofthe Bank at 460 park Avenue h m December 1997
to the present dxte, and SBI-USshall continue to file all required Forms FFIEcIo02S on a timely
and (ICCUIBC basis in the W e until suchtime 8s the management of the Nwau Branch is
tmskmd fiom the United States.
Procedure for Handtinn Abandoned P I W D ~ ~
IS.
Within 30 days ofrrccipt ofthe report ofrhe Independent Firm nquired by
paragrsph 1 henof, SBI-US shall submit to the Supervisors an acceptablewritten program
detailing how SBLUS’s three New York Branches shall ensure compliance with the
n q u h e n b of the New York Abandoned Property Law Section 301, The program shall, at a
minimum:
(a)
provide a mechanism to automatically identify, c m l and monitor
inactive andlor dormant accounts;
(a)
provide pmoedurw to ensure that reports of dormant accounts am
~ouratclyproduced to comply with the requirements of the New York Abandoned PropertyLaw
and o k state laws; and
(c)
provide p r o d u n s to ensure a c c monitoring,
~
control,reporting and
escheatment of all dormant and abandoned items.
21
patridions on Transfen to the Sate Bank oflndia (Cabfornu)
19.
Norwithding any other provisions ofthis Order. the Branches and the Agency
shall not transfer any ofthe Reviewed Accounts, any accounts lacking identifying information
required by 3 1 C.F.R.Section 103, or transactional services of any type to the State Bank of
India (California). Las Angeles, California, without providing 10days prior mitten nodce to the
Supcrvisorr.
&rcssmtnt of I CbU Monev Penrltv and Moaemn Pavment
20.
SBI-US is hereby assessed and shall pay to thc Board of Governon and to the
FDIC a civil money penally in the sum of S3,750,000 pursuant to section 8(i) ofthe FDI Act,
12 U.S.C. 18180, for apparent violations of 12 CER 326.8 and for ~ c k l e sesngagement in
unsafeand unsound p d c c s as a result of SBI-Us’s failure to establish and maintain
procedures relponably designed to wurc and monitor compliance with the BSA and SBI-US’s
!Xlm to maintain axurate and complete books and m r d s . The civil money penally aqscsstd
by this Order shall be remitted in full at thc time of the exwution of this W e r by wire transfer
of immediately available funds to the Federal Reserve Bank ofNew Yo& ABANo. 021001208,
to the attention of Thomar, C. Baxter, Jr., General Counsel and Executive Vice President
The
Ncw York Reserve B&’on behalfofthe of the B o d of Governors and the FDIC,shall
distribute this sum to the U.S. Department ofthc T r t a y pursuant to section 86)ofthe R)I
Act.
2 1.
SBI-US is haeby assessedand shall pay to the New Yo& Department a monetary
payment in the amount of S3,750,0OO pursuant to the New Yo& Banking Law Section 44 for the
22
failureto establish and maintain books and records reasonably designed to assure and monitor
compliance with reporting requirements set forth in 3 N.Y.Comp. Codes R 8 Regs. Part 300.1,
The monetary payment assessed by this Order shall be remitted in 1u.at the time ofthe
execution of this Order by wire wnsfer of immediatelyavailable funds to the account of the
New York D e p m e n t at Chase Manhattan Bank, 4 New York Plaza,New Yo&, New Yo&
paewe Bank of Iadia
22.
Ifapproval ofthe Reserve Bank of India (“RBI”)is required for SBI-US to
comply with any provision ofthis Order, and RBI does not pant such approval, the Bank shall
promptly notifythe SupcMsors and provide acceptable documentation of RBI’s position, and
shall nevenhelcss ens-
that its U.S. activities continue to be consistent with applicable U.S.
l a w and ngulations and the terms of this Order.
Ttrms and Effect of Order
23.
(a)
The written plans, pmgmms, policies, and proceduns and the report and
engagement Iette~(s)r e q h d by paragraphs l(b), l(c), 8(a), 9,10,12,13,14, IS@), lS(c), and
I8 bereof shall be submitted to the SupeMsors for review and approval. Amptable plans,
programs, policies, and procedures and an acceptable report and engagemenl later(s) shall be
submitted within the time periods set 6thin this Order. The Bank, Branches, and Agency, as
applicable, shall adopt the approved plans, programs, policies, and procedures and the approved
report and engagement letter(s) within 10 days of approval by the Supervisors,and then shall
23
fully comply with them. During the term of this Ordu,the approved plans, programs. policies
and procedures and the report and engagement lerter(s) shall not be amended or rescinded
without the prior written approval of the SupcMsom.
(b)
Submissionof documentsto the Supervison shall be effected by
concurccnt submissions to the SM Fmcisco Federal R e m e B d and the Ncw York
Dcparhent.
(c)
It is undustood and agrccd that SBI-USwill submit dK interim polioits
and procedures r e q u i d by p-ph
7 hemfto the Supervisorsas expeditiously ds possible
after the issuance of this Order. The Supavison will provide I response within 30 days
following receipt of the lntcrhn policies and procedures, and SBI-USand the SupmriSOrs will
work together to expedite their approval and satisfactory implementation. The interim policies
and procedures shall remain in full foroe and eftect until all other plans, programs, policies, and
procedun~required by this Order have been submitted and approved in accordance with the
provisions ofpangraph 23(a) hereof
(d)
It is undmtood and agreed tbat the Chicago Branch and the Agency have
independent opuSting systems h m thc New York Branches, and that the plans. programs,
policies, and procedures rrquircd by this Order will reflectthose differences.
24.
W
i
t
h
i
n 30 days after the end of each calendar quarter following the date of
issuance of this Order (Deccmbcr 31, Mfuch 31, June 30, and September 30), SBI-USshall
furnish to the Suptnisors a written progrcss report detailing the firm and manner of all actions
taken to soom compllance with this order, and the results thereof. SBI-US shall also provide
24
copiw of each proguass repon to the board of directon of the Bank and to the Reserve Bank of
Mia
25.
Communications regarding this older other than those covered by parsgraph
23@) hemf shall be sont to:
Mr.PX.sarlcar.
Dy,ManagiingDirector & GE @B),
State Bank of India
Iotemational Banking Group,
State Bank Bhavm,
Madame CamaRoad,
M ~ ~ b-a400
i 02 1
India
Mr.Robea O'Sullivan
Senior Vice President
Federal Rescm Bank OMCW
YO&
33 Liberty Smet
NewYork,NY 10045
Ms. Teresa Curran
Vice President and Managing Dinctor
Feded Reserve Bank of San Francism
101 Madrctstmt
SM F~ancisco,Calihmia 94105
Mr.George J. M s a
Regional Director
F e d d Deposit hurpnce Corparstion
San FranoiSm R e gb d OEce
25 Eckcr Strtet, Suite 2300
SanFmisco, CA 94105
Mr. Michael J. Lesser
Deputy Superintendent of Banks
New York State Banking Department
l W Rector Street
NewYo&,NY loo06
25
26.
The provisions ofthis Order shall be binding on the Bank, each Branch, the
Agency, and each of their institution-aiated parties in their capacities as such, and their
successors and assigns.
27.
Each provision ofthis Order shell remain c&ctive and enforceable until stayed,
modified, terminated, or suspended in Writing by the Suptrvisors.
28.
Notwithstanding any provision of this Order, the Supcrvkors may, in their
discretion, gmnt witten extensions oftime to the Bank,a Branch, or the Agency to comply with
my provision ofthis Order.
29.
The provisions ofthis Order shall not bar, estop or othenvisepnvent the Board of
Governors. tbe FDIC,the New York Department, or any faded or state agency or depamnent
h m talcing any other action afftcting the Ba& any Branch, the Agency, the stste Bank ofIndia
26
(California), Los Angeles, California, or any oftheircumnt or former institutionaffiliated
p&CS.
By order of the Board of Governors (with respect to the Bank., the Broadway Bmch, and
the Agency),
the FDIC (with respect to the Bar&, the park Avenue B m h . the Chicago Branch,
and the Flushing Branch), and the New York Deparhnent (with rcspcct 10 the Park Avenue
Branch, the Bmdway Bmch and the Flushing Branch). effectivethis
0day of f i b uw
2001.
STATE BANK OF JNDM
MUhmaINDIA
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
FEDERL DEPOSlT INSURANCE
COReoRATION
sooiatc Dirtctor
NEW YORK STATE B A " G
DEPARTMENT
21
eA9