On April 29, 2023, United States regulators levied a $30 million fine against the Manhattan branch of the Bank of China. The penalty was issued due to deficiencies in the bank’s counter-terrorism financing protocols, which are designed to prevent funds from reaching terrorist organizations. The Bank of China, established in 1912 after the Qing dynasty’s Da-Qing Bank was renamed under the new Republican government, has a long and storied history.
Until 1942, it issued banknotes for the state and was one of the “Big Four” banks of that era. Today, it remains among China’s “big four” state-owned lenders, with its headquarters in Beijing.
The Financial Stability Board classifies it as a systemically important bank. As of December 31, 2019, it was the second-largest lender in China and the ninth-largest bank globally by market capitalization. This scale made the compliance failure in Manhattan particularly significant.
Counter-terror financing checks are a legal requirement for global banks, serving as a barrier against the funding of attacks. Regulators determined that the bank’s systems and controls were inadequate, creating a potential gap through which money could have flowed to support terrorist activities.
The bank has not publicly commented on the specific allegations. It may argue that the lapses were isolated incidents and point to steps taken to improve compliance. However, the regulator’s findings suggest the problem was systemic rather than a one-time mistake. The $30 million fine, while substantial, represents a relatively small cost for a bank of this size.
However, the reputational damage is more significant. A systemically important bank, one that the global financial system relies on, was found to have weak counter-terror controls in a major U.S. market.
Manhattan, as a financial hub, handles high-value transactions, and lax checks on those transactions posed a real risk. The Bank of China has a long history, surviving the fall of the Qing dynasty, the rise of the Republic, war, and revolution. It became a state-owned giant in a communist economy and expanded into global markets, including its Manhattan branch.
Now, it faces consequences for failing to adhere to the rules that accompany its global role. U.S. regulators do not impose such fines lightly, as counter-terror financing is a priority.
The bank’s defense, if it mounts one, will need to be strong, given the record of inadequate systems and failed controls. There is no evidence yet that the bank has accepted the findings; it may contest them or settle. This event is part of a broader pattern of major banks facing fines for weak compliance.
For the Bank of China, the timing is awkward as it seeks to operate as a global player. Global players are expected to follow global rules, and the Manhattan fine indicates that, at least in one branch, the bank was not doing so.
The regulator’s findings are clear: the systems and controls were inadequate, the potential for financing terrorist activities was real, and the $30 million fine is the consequence.
