By Chelsey Dulaney and Daniel Huang
State Street Corp. disclosed Thursday that it expects to face a
public enforcement action from the Federal Reserve and
Massachusetts Division of Banks over deficiencies in its compliance
programs.
The Boston-based bank said it expects it will be required by a
written agreement to improve its compliance procedures after
deficiencies were found related to the Bank Secrecy Act,
anti-money-laundering regulations and U.S. economic sanctions
regulations. Shares edged down 0.4%, to close at $77.72.
In a regulatory filing, the company said it also expects it will
be required to retain an independent firm to review account and
transaction data over a prior three-month period for suspicious
activity.
The company warned that if deficiencies are identified, it may
face fines or other regulatory sanctions. Some analysts believe
that the hire of an independent consultant will mean State Street
will have clarity on the possibility of additional charges
soon.
State Street couldn't be immediately reached for comment.
"This is another regulatory/legal overhang that the company must
negotiate," said KBW Inc. analyst Brian Kleinhanzl in a note.
While Mr. Kleinhanzl said any spending related to the
enforcement action should only have a minimal impact on earnings,
he noted that the bank also moved to issue preferred stock
Thursday, earlier than some analysts expected, which may reduce
projected 2015 earnings.
State Street's results have been weighed by higher regulatory
and compliance costs recently. Meanwhile, the bank has been adding
to its legal reserves for currency-related claims.
Last month, State Street said it added a $150 million charge to
its legal reserves for resolving outstanding claims related to
foreign-exchange activities.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com and Daniel
Huang at dan.huang@wsj.com
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