Federal Reserve Board Fines International Bank $2.4 Million for Disclosing CSI

The Federal Reserve Board recently issued a cease and desist order and imposed a fine against an international state-owned bank and its New York branch for allegedly impermissibly disclosing confidential supervisory information (CSI).

Under the Board’s regulations, CSI is defined to include reports of examination and other supervisory communications from the Board, as well as information derived from, related to, or contained in such reports, or documents prepared by, on behalf of, or for the Board, the Federal Reserve Bank of New York, or a financial institution’s federal or state supervisory agency.  The Board’s regulations prohibit disclosing confidential supervisory information to third parties without the Board’s approval.

The Board and the Federal Reserve Bank of New York investigated the policies and procedures relating to compliance with regulations relating to CSI of the bank’s New York branch and alleged that the branch did not have formal policies, procedures, training, or internal controls to ensure CSI was properly handled by employees and was not disseminated without proper authorization.  The Board further alleges that the bank and its New York branch were told that a proposed communication contained CSI and could not be disclosed without a waiver, but the bank and branch did not obtain a waiver before disclosing such information.

The Board imposed a $2,431,956 civil money penalty on the bank and its New York branch.  The bank and its New York branch also agreed to provide the Board with a written plan to improve the branch’s compliance with requirements to identify, monitor, and control CSI.