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Regulators Issued Fewer AML Fines in 2014, But Packed a Bigger Punch
February 13, 2015 By Colby Adams, Kira Zalan and Irene Madongo
Sometimes a decline in bank enforcement total, according to data reviewed by Washington, D.C.-based American Bankers
actions isnt a good thing, even for ACAMS Association.
bankers. Such is the takeaway of a review
of enforcement action data spanning The ongoing annual decline in the When the examiners come in, theyre
back five years, during which the number number of AML-related regulatory orders looking at everything in the BSA program,
of formal Bank Secrecy Act penalties fell was paired again with a rise in outlays said Rowe, citing discussions with the
nearly 20 percent while fines and regulatory demanded in monetary penalties. Banks associations members. Its being much
demands grew. paid $351 million in 2014, or roughly seven more carefully analyzed.
times the fines levied in the previous year, In 2014, regulators also took a tougher tack
In 2014, the U.S. Treasury Department, excluding concurrent fines. with small financial institutions, including
Federal Deposit Insurance Corp. money services businesses, according to
(FDIC) and Federal Reserve Board The growth in fine sizes reflects the fact Daniel Tannebaum, a former Treasury official
issued 45 enforcement actions for that the Bank Secrecy Act (BSA) is still very and current global financial crimes sanctions
anti-money laundering (AML) infractions, much on the regulatory radar, according leader at PricewaterhouseCoopers LLP.
an 11 percent drop from the 2013 to Robert Rowe, a vice president at the


Through prosecutions pursued and
deferred, the U.S. Justice Department
has exacted over $18 billion from financial
institutions over the last five years for
violations of sanctions, tax evasion and
money laundering laws. In 2014, the
department took in more than sixfold the
total monetary penalties it levied for such
violations in 2010.


Total monetary settlements levied with some shelling out significantly more. The New York State Department of
for money laundering, sanctions and Financial Services (NYSDFS) also took on a
tax evasion by the regulators and law As in previous years, the Justice Department more assertive role over the year by seeking
enforcement agencies surpassed $13.4 packed the biggest punch in 2014, largely a total $3.7 billion from five banks that
billion for the year, data shows. through its role in the nearly $9 billion violated federal laws against tax evasion,
settlement in June with BNP Paribas for money laundering and sanctions busting,
The sum includes fines and settlements willfully violating U.S. sanctions against four and in doing so, broke state statutes.
imposed by the Office of the Comptroller nations. In January 2014, the department
of the Currency (OCC), FDIC, the Federal shepherded a $1.7 billion settlement to Two banksStandard Chartered and Bank
Reserve, the Financial Crimes Enforcement conclusion with JPMorgan Chase for its of Tokyo Mitsubishifound themselves
Network (FinCEN), the Office of Foreign failure to identify Bernard Madoffs Ponzi paying the state regulator for the second
Assets Control (OFAC), the U.S. Justice scheme with AML controls. The settlement, time in the last two years. NYSDFS dinged
Department, and New York state and including linked agreements requiring the the banks to the tune of $300 million or
municipal agencies, minus redundant bank to pay penalties to the OCC and more for failing to address or disclose
penalties that were concurrently imposed. the trustee acting on behalf of Madoffs compliance issues related to their initial
Four international banks paid U.S. investors, totaled $2.05 billion. settlements.
authorities more than $300 million each,



In the past three years, major U.S.
financial regulators issued a total of 155
enforcement actions for AML, tax and
sanctions violations with penalties totaling
in the billions.


With greater emphasis than in previous The board and senior managements As part of its largest-ever AML settlement,
years, regulators made it clear in speeches, governance and culture directly affects the the Financial Industry Regulatory Authority
guidance and enforcement actions that implementation of overall risk management (Finra) in February fined Harold Crawford
senior managers and boards of directors controls, including AML controls, said $25,000 for failing to properly scrutinize the
must take responsibility for banks AML John Wagner, a former director of AML trading of six billion shares of penny stocks
efforts. More than ever, federal and state compliance with the OCC who retired from during his time as the global AML chief for
regulators sought to penalize individuals the agency last year. Brown Brothers Harriman. The bank paid
through fines and public disclosures. Finra a record $8 million for knowingly
The penalties also extended to compliance giving investors anonymous access to the
officers in unprecedented ways. U.S. financial market.

In December, FinCEN sued Thomas Haider, Under terms of a NYSDFS settlement

a former chief compliance officer with disclosed in November, the manager
MoneyGram, for $1 million for purportedly of Bank of Tokyo Mitsubishis AML
ignoring signs of a telemarketing scheme compliance officer resigned. The agency
that tricked Americans into wiring millions also barred two of the banks employees
of dollars to locations in Canada. Haider from conducting business with any New
failed to address concerns raised by other York financial institution it regulates.
employees about the possible complicity
As head of OFAC in 2014, Adam Szubin of MoneyGram agents, the bureau said. Counting actions by the U.S. Securities
helped levy fines against six financial and Exchange Commission (SEC), Finra
institutions, including a nearly $1 billion The fine is probably the most significant and other agencies, regulators penalized
monetary penalty against Clearstream enforcement action against an individual 21 individuals for AML lapses, either with
Banking SA, Bank of America and BNP in recent history, said Wagner. Holding fines or restrictions on their employment.
Paribas. the chief compliance officer accountable The individuals included directors and
for the deficiencies of the BSA compliance compliance officers at banks, money
program is a significant development services businesses and casinos.
within BSA enforcement.



Many of last years enforcement actions departments, including the audit have to be demonstrably different than
were predicated on shortcomings found component of compliance management the standard due diligence procedures for
in each of the financial institutions three systems, according to Rowe. lower- and medium-risk accounts, as well
lines of defense: business, compliance and as in [know-your-customer] records, said
audit, according to Fred Curry, a principal Theyre looking at exactly how its Vasilios Chrisos, a principal with Ernst &
at Deloitte Financial Advisory Services LLP. structured, what kind of systems they Young LLP.
have in place, the staffing that they have,
So what youre seeing is more and how often theyre reviewing policies and Theres a lot of regulatory pressure for
more findings citing totally inadequate procedures, how often theyre checking organizations to define the exact EDD
compliance programs, which leads to their systems to make sure the monitoring measures the bank will take, including
more severe enforcement actions, much programs are doing what theyre supposed more background checks on legal entity
larger penalties, and much more expensive to be doing, said Rowe. Its the entire customers to find beneficial owners, said
program remediation requirements, said compliance program. Chrisos. This is especially becoming true
Curry. for casino operators who accept billions of
Regulators also made clear that the dollars in wire transfers each year from non-
Examiners often asked about compliance enhanced due diligence (EDD) measures U.S. patrons, he said.
management systems and audit banks implement for high-risk clients


Not all of the trouble banks found The uptick in the use of the nonpublic on the nonpublic orders in response to
themselves in made it into press releases regulatory orders, including memoranda congressional criticism over its failure to
and headlines in 2014. Compliance of understanding, is part of a regulatory more aggressively enforce the requests.
consultants and bankers contacted for strategy to get the attention of banks Under the revised policy, the office
this story said that, anecdotally, regulators senior management, said Tannebaum, said it would more quickly issue public
handed banks more matters requiring citing conversations with clients. enforcement actions when banks fail to
attention, or MRAs, and matters requiring In October, the OCC revamped the respond to MRAs.
immediate attention, or MRIAs. terms under which it would follow up
What youre seeing is more and more findings citing totally
inadequate compliance programs, which leads to more severe

enforcement actions, much larger penalties, and much more
expensive program remediation requirements.

The number of AML fines by Finra also fell The self-regulatory organization, which brokerages, but more and more Finra is
last year compared to 2013. acts on behalf of the SEC, issued 29 such going after the big wirehouses, and there
penalties in 2014, down from 34 the is more of that in the works.
previous year. The SEC last year handed
down four AML enforcement actions, Over the year, Finra focused on two
including a $5 million fine against Wells particular issues: penny stocks and
Fargo Advisors and a separate order correspondent accounts for foreign
targeting a former employee. financial institutions, said an official with the
organization who asked not to be named.
Led by the $8 million penalty assessed
against Brown Brothers Harriman in Finra had a very keen interest in foreign
February 2014, the fines levied last year by customersforeign banks, mostly
Finra blew expectations for whats coming holding correspondent relationships with
The U.S. Justice Department in 2014 next completely out of the water, said Bao the broker-dealer, said Nguyen. Five
drove record outlays for financial Nguyen, a former Finra examiner. years ago, that wasnt prevalent. Now
institutions that breached laws against Finras asking for the broker-dealer to
money laundering, sanctions busting For the first time, youre seeing Finra demonstrate that they have complied with
and tax evasion, in large part through penalties consistently plow past the range 31 CFR 1010.610, which is a foreign financial
its nearly $9 billion settlement with BNP of thousands of dollars into the range of institution due diligence requirement.
Paribas in June. millions of dollars, said Nguyen. Theyre
still looking at the smaller and regional


By contrast, financial regulators in the violations, according to Michael Ruck, a The trend has made de-risking a topic in
United Kingdom had a quiet year, with London-based senior associate with Pinset the country, according to Ruck.
only one AML-related enforcement action: Masons.
the Financial Conduct Authoritys 7-million FCA officials have also signalled that they
pound settlement with Standard Bank Plc With regulators asking more questions are shifting from a remedial approach
in January 2014. about politically-tied clients, some banks to fines against banks, according to
are having to weigh up money laundering Richard Burger, a partner with Reynolds
But thats not to say that British regulators regulatory and prosecution risks against Porter Chamberlain LLP and a former
have gone soft on financial crime. Rather, commercial interests, and some banks enforcement attorney with the U.K.s now-
the FCA is focusing more on the issue are finding it easier and cleaner to close defunct Financial Services Authority.
in general and increasingly looking at accounts, he said.
compliance controls intended to stop So we are likely to see more anti-financial
money laundering, bribery and sanctions crime fines in 2015, he said.

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