Regulators are aiming enforcement oversight at your bank


(UPDATED) As a financial institution, regulators see you as the first line of defense against criminal activity. You have a duty to ferret out your customers’ questionable business—and not taking enough action can carry significant and costly consequences.

Over the past few years, regulators have relentlessly pursued financial institutions for violations of the Bank Secrecy Act (BSA) and anti-money laundering (AML) laws. And they’ve imposed record-setting penalties when these failures resulted in a lack of adequate customer due diligence, internal auditing, or reporting of suspicious activity. In fact, on July 22, 2015, federal regulators imposed a $140 million fine on Banamex USA for violating the Bank Secrecy Act (BSA) and anti-money laundering (AML) laws and regulations by failing to implement an effective BSA/AML Compliance Program.

Financial regulators aren’t just imposing serious penalties against financial institutions. They are also increasingly holding members of management and compliance officers personally liable. A vocal commitment by the Financial Crimes Enforcement Network (FinCEN) to make greater use of its ability to impose penalties on individuals, as well as the promotion of high-profile former federal prosecutors to head financial regulatory agencies, has ushered in a new enforcement era. Financial regulators are now assessing substantial fines of up to $1 million against individual compliance officers and corporate managers for their role in failing to:

  • Establish, implement, and/or maintain an effective anti-money laundering program
  • Report suspicious activity
  • Conduct requisite due diligence and follow customer identification procedures

As a member of management, it is important for you to build and maintain a workplace culture that supports responsible business practices, regulatory compliance, and financial safety and soundness. Placing a handbook on a shelf to gather dust will do little to reduce your liability. Under Secretary of the Department of Treasury David Cohen recently stated that participants in regulated industries should “take seriously the variety of illicit finance risks that different clients present, and design and implement effective [BSA/AML] programs that assess and address risk on a client-by-client basis.”

While you should make sure to implement BSA/AML programs, policies, and procedures, you should also hire BSA/AML compliance officers to conduct adequate audits and retain sufficient compliance staff. Education is of the utmost importance. Hold regular training sessions and educate your corporate officers about BSA/AML requirements and the consequences of failing to address compliance complaints.

Need more reason to take action? Here are other significant examples of enforcement that resulted in large penalties:

  • On June 15, 2015, FinCEN announced the assessment of a $4.5 million civil money penalty against Mingo Bank for willful violations of the BSA stemming from its failure to establish and maintain an adequate anti-money laundering program and customer due diligence program, including:
    • Allowing more than $9.2 million in suspicious cash transactions to flow through the institution unreported. 
    • Failing to file the requisite Currency Transaction Reports and Suspicious Activity Reports (SARs) related to a corporate customer’s structured transactions that the bank knew a branch manager had facilitated.
    • Assigning the bank’s BSA Officer multiple non-BSA responsibilities that left him with inadequate resources and time to oversee the bank’s BSA compliance program.
  • On Nov. 25, 2014, FinCEN assessed a $300,000 civil money penalty against North Dade Community Development Federal Credit Union for significant BSA and Patriot Act violations related to:
    • Blind reliance on a third party vendor for due diligence matters
    • Failure to implement internal controls, conduct independent testing, or hold training
    • Failure to designate an appropriate BSA compliance officer, despite facilitating over $1 billion worth by money services business customers located in high-risk jurisdictions, including locations in Central America, the Middle East, and Mexico
  • On June 26, 2014, the Office of the Comptroller of the Currency (OCC) issued a consent order for a $500,000 civil money penalty in connection with Associated Bank’s failure to:
    • Conduct adequate risk assessments
    • Conduct sufficient customer due diligence
    • Properly identify high-risk customers
    • Implement an adequate suspicious activity monitoring system
    • Ensure adequate independent testing of the bank’s BSA/AML compliance program
    • Employ a BSA officer and staff with the requisite knowledge of regulatory requirements
    • Adequately train BSA staff
    • File over 670 SARs
  • On Jan. 14, 2014, the OCC issued a consent order for a civil money penalty of $500,000 against Old National Bank for BSA/AML deficiencies including a failure to:
    • Conduct adequate risk assessments
    • Obtain more than the minimum information required for Customer Identification Program purposes
    • Implement an adequate suspicious activity monitoring system
    • Properly identify high-risk customers
    • Hold adequate internal audit reviews of the BSA/AML program
    • Employ a BSA officer and staff with necessary knowledge of regulatory requirements
    • File over 182 SARs

For more information, please contact one of the attorneys listed below.

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