Because New York serves as the geographic connectivity for foreign banks in the United States, additional oversight by New York State Department of Financial Services creates additional AML and Sanctions compliance challenges for these institutions. A smaller U.S. footprint does not necessarily equate to lowered expectations for controls due to the correspondent and connective nature of foreign bank transactions.
"Nearly half of the foreign banks operating in the U.S. are regulated by the NYSDFS. Per the NYSDFS 2016 annual report, of the 679 institutions in operating in New York State, 112 are considered foreign branches and 13 are foreign agencies; and of the 234 with State charter, 95 of those are foreign branches and agencies. 28 of the foreign institutions operate under a Federal charter. New York State chartered and licensed banking, lending and financial services institutions listing shows 86 institutions with foreign branches and 13 institutions with foreign agencies. Furthermore, many New York State banks have offices and/or branches in other states."
Foreign banks that have or want access to banking services in the US have found themselves subject to several requirements of the USA PATRIOT Act. Failure to commit the additional resources and management attention to these compliance matters means foreign banks operating in the US run a substantial risk of adverse regulatory or law enforcement action; the range of these actions is broad, including possible civil fines, criminal sanctions or even the loss of a banking license to operate in the US. Regulatory enforcement action may also result in supervisory restrictions on the ability of a foreign bank to expand its activities or make acquisitions in the US during the period that the enforcement action remains in effect.
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