Alert October 01, 2013

OCC and FinCEN Take Enforcement Actions and Assess Civil Money Penalty Against Small Bank for BSA/AML Violations

The OCC entered into a consent order with a small, New Jersey-based bank with approximately $118 million in total assets for violations of the Bank Secrecy Act (the “BSA”).  The OCC assessed a civil money penalty (“CMP”) against the bank of $4.1 million.  The consent order and CMP come after the OCC’s examination and investigation of the bank’s anti-money laundering (“AML”) compliance programs, in which the OCC found deficiencies in the bank’s former foreign correspondent business with casas de cambios (“CDCs”).  The OCC found that, among other deficiencies, the bank failed to adequately monitor more than $1.5 billion of dollars of wire transfer activity in CDC accounts, failed to comply with the statutory requirements regarding customer due diligence and enhanced due diligence of the CDCs, and filed over 190 untimely SARs involving suspicious transactions conducted through the bank.  The OCC previously took enforcement action against the bank in 2011 related to similar violations in which the bank was required to undertake remedial actions with respect to its BSA/AML compliance program.

In a separate action, the Financial Crimes Enforcement Network (“FinCEN”) took an enforcement action against the bank for related BSA/AML compliance violations. FinCEN found that the bank was “deficient in all four pillars” of the requirements of the Bank Secrecy Act.  In particular, FinCEN found that since June 2009, the bank lacked an effective AML program, failed to adequately and timely report suspicious activities in the Mexican and Dominican Republic CDC accounts, and failed to conduct adequate due diligence on foreign correspondent accounts.  Of particular import to FinCEN was the fact that information concerning the heightened risk of the foreign correspondent accounts was publicly available. FinCEN pointed to its 2006 advisory notifying financial institutions of the potential threat of narcotics-based money laundering between Mexico and the United States; and in particular, the risk to financial institution posed by transactions with CDC accounts.

FinCEN also imposed a CMP of $4.1 million against the bank, but the OCC and FinCEN actions were collectively deemed satisfied by the bank making one $4.1 million payment to the U.S. Treasury.