The Federal Reserve terminated a 2019 enforcement action against Sumitomo Mitsui Banking Corp. (SMBC), concluding a six-year period of heightened scrutiny over the institution’s anti-money laundering (AML) practices.
The regulator concluded that SMBC had addressed the AML compliance deficiencies identified in a 2019 order targeting its New York branch. At the time, the Fed had cited “significant deficiencies” in the bank’s AML and Bank Secrecy Act (BSA) compliance program, including poor risk management, inadequate customer due diligence, and weak transaction monitoring.
The order also emphasized the need for institution-wide coordination and control over foreign correspondent banking relationships.
The Federal Reserve’s termination of the action potentially opens the door for SMBC to accelerate its U.S. expansion, Bloomberg said. Sumitomo Mitsui Financial Group Inc. (SMFG), the parent company of SMBC and Japan’s second-largest banking institution, has signaled in recent years its ambition to grow its presence in the United States by hiring investment bankers, increasing lending operations, and deepening partnerships with U.S. firms, the news agency said.
In 2023, the Japanese bank expanded its economic stake in Jefferies Financial Group Inc. to approximately 15%, building on a joint venture between the firms aimed at expanding cross-border capital markets services. SMBC has also explored a potential equity trading partnership with Jefferies in the United States.
The enforcement termination potentially eases the way for those plans to go forward, according to Bloomberg.
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