The Canadian bank, U.S. Federal Reserve and an Illinois state agency have signed an agreement that gives BMO until late July to submit an acceptable plan for resolving the short-comings.
Among other things, the document says state and federal authorities identified problems when they examined the bank's branch in Chicago, where its BMO Harris Bank is based.
Details of the deficiencies weren't disclosed in the document but it outlined steps for BMO to take including improved oversight by its board of directors and better internal training and reporting within the bank's organization.
The agreement, dated April 29 and made public on Friday, outlines several deadlines for BMO to meet including an acceptable a written plan within 90 days and regular progress reports.
The bank said it was working to correct the problems.
"BMO is fully committed to the highest standards of regulatory compliance with Bank Secrecy Act/Anti-Money Laundering requirements and expectations in each of the jurisdictions in which we operate," BMO vice-president Paul Deegan said in an emailed statement.
In recent years, U.S. authorities have increased efforts to prevent criminals and terrorists from using the banking system for illicit activities. Among other things, it requires banks within its jurisdiction to comply with the Bank Secrecy Act's anti-money laundering requirements.
The 11-page agreement says BMO Financial Corp., the U.S. subsidiary that technically owns BMO Harris Bank, "lacked effective systems of governance and internal controls to adequately oversee the activities of Bank of Montreal’s U.S. Operations with respect to legal, compliance, and reputational risks related to compliance with BSA/AML requirements."
Under the deal, the bank has agreed to provide funding for personnel and other resources to operate a system that "fully addresses the organization’s compliance risks on a timely and effective basis."Suggest a correction