H/T to Money Jihad blog:
JP Morgan Chase has dropped Al-Rajhi Bank, the world’s largest Shariah-compliant lender, as a correspondent banking client amid a push to improve risk controls.
The relationship with Saudi Arabia’s biggest publicly traded bank ended Dec. 31 because JPMorgan couldn’t get enough information on where payments in dollar-clearing services for Al-Rajhi had originated.
JPMorgan said it cut off the service to about 500 foreign lenders last year as regulators press the world’s biggest banks to verify that transactions are used for legitimate business. The crackdown seeks to halt funds tied to money laundering, terrorism and countries covered by economic sanctions.
Al-Rajhi, founded in 1957 by billionaire Sulaiman Al Rajhi, had 9,000 employees and about 500 branches in Saudi Arabia, Jordan,Malaysia andKuwait, according to a January 2012media kit. Members of the Al Rajhi family, one of Saudi Arabia’s richest, are the biggest shareholders of the company, which had $74.6 billion of assets on Dec. 31, according to data compiled by Bloomberg. Shariah-compliant financial firms provide products adhering to Islam’s ban on interest.
The U.S. Office of the Comptroller of the Currency ordered JPMorgan to improve anti-money-laundering efforts last year, finding that its controls tied to the Bank Secrecy Act were inadequate. The firm failed to find out enough about banking customers and identify suspicious activity, according to the January 2013 consent order. The Bank Secrecy Act requires firms to report all large cash deposits to help prevent crimes such as drug-trafficking and terrorist financing.