Fed targets State Street for AML compliance

The bank will have 60 days to submit a plan detailing changes to its AML/BSA compliance and risk-detection policies. 

The Federal Reserve has ordered State Street to improve its compliance with anti-money laundering (AML) regulations, according to an enforcement agreement signed by State Street, the Fed and the Massachusetts Division of Banks.

The bank, which offers private equity clients a suite of compliance and regulatory support services, has 60 days to submit a written plan detailing how it will strengthen its AML and Bank Secrecy Act (BSA) compliance and to boost funding for those initiatives.

State Street will have the same 60-day deadline for submitting a plan to improve its AML risk-detection capabilities, including more thorough customer due diligence policies and an updated description of the lines of control within the bank that oversee AML compliance. It is unclear how the review could impact its private equity services. A State Street spokesperson declined to comment.

Within 30 days, State Street is ordered to bring in an independent firm to review account and transaction data from April 1, 2013 and June 30, 2013, to determine if State Street properly managed suspicious activity. The Fed will have the right to approve the outside auditor and could order a review of additional time periods.

The Fed also mandated that State Street be required to submit progress reports on changes to the compliance program within 30 days of each quarter-end.

“We are committed to comprehensively addressing the regulators’ concerns and meeting our compliance obligations,” a State Street spokesperson said in an email to pfm. “The deficiencies identified relate to State Street’s internal compliance programs under certain banking regulations.”

In recent years, State Street has faced investigations from the Department of Justice and the US Securities and Exchange Commission on issues including foreign-exchange trading and soliciting business from public pension plans.

State Street Alternative Investment Solutions topped eVestment’s annual fund administration ranking for the second year in a row last month, with $422.6 billion of private equity and real estate assets under administration in 2014.