The Federal Reserve Board said it told Bank of Montreal to step up efforts at the Canadian bank's Chicago branch to detect and prevent money laundering.

The Fed entered into a written agreement requiring Bank of Montreal to strengthen its compliance after a recent inspection by the central bank's examiners found deficiencies in the bank's anti-money laundering program. The Fed made the agreement public on Friday.

A spokeswoman for the Fed declined to describe the problems it found with the Bank of Montreal's compliance program, saying its policy prohibited discussion of specific institutions.

The agreement said the Fed found the Bank of Montreal's Chicago branch, in trying to follow anti-money laundering rules, "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."

Banks operating in the United States, whether they are American or foreign, must closely monitor customer activity for signs of money laundering or other illegal acts. The rules were first defined by the Bank Secrecy Act and later strengthened by the USA Patriot Act after the attacks of September 11, 2001.

U.S. regulators rely on banks' anti-money laundering programs to help identify criminal and terrorist activity.

(Reporting by Emily Flitter; Editing by Lisa Von Ahn)