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BSA/ OFAC Lessons from Enforcement Actions

by Sam Ott and Mary Beth Guard, BOL Gurus

In the first six months of 2002

  • FinCEN has levied a $700,000 civil money penalty against a bank for BSA violations;
  • a former bank employee and institution-affiliated party was the subject of an FRB cease and desist order stemming from alleged structuring of cash deposits;
  • a bank was ordered by FRB to go back and hire an outside forensic consultant to review the bank's money laundering compliance records for the last three years;
    and
  • five additional banks have either been ordered by the regulators or have voluntarily agreed in response to an enforcement action to
    • develop a written internal BSA compliance program;
    • conduct employee BSA training;
    • conduct independent BSA compliance testing;
    • review BSA customer exemptions;
    • develop special procedures to deal with special risks posed by the business activity at particular branches and/or designate a BSA Compliance officer who reports directly to the Board of Directors.

There are lessons to be learned from these enforcement actions about the regulatory expectations for BSA and OFAC compliance. This BOL round-up of enforcement actions related to BSA and OFAC give you insight into how frequent such enforcement actions are, what types of conduct provoke them, and what the regulators consider appropriate corrective action. The details are spelled out under each of the orders below. (It should be noted that in each of these instances except for the FinCEN action, BSA/OFAC compliance was not the sole focus of the agreements or orders.)

The agreements and orders touched on the BSA/OFAC issues in varying levels of detail. In some instances, as with the case of Guaranty National Bank of Tallahassee, Florida, the regulators actually spelled out nine minimum requirements for the bank's detailed written program of BSA policies and procedures. In other instances, the regulators simply said the bank must develop a written program containing internal controls and independent testing to ensure compliance with BSA or develop a comprehensive BSA training program for all personnel.

First Commercial Bank
Alhambra, California

FDIC Order to Cease and Desist
The bank was required to develop an internal compliance program regarding BSA and related rules and regulations. Effective training must be provided to all appropriate personnel at the bank including, but not limited to, tellers, customer service representatives, lending officers, branch managers and all other customer contact personnel. The bank was also required to provide a system for independent testing by a third party of its policies, procedures, and practices for BSA compliance. The BSA compliance program must be managed by a qualified officer.

First National Bank of Dublin
Dublin, Texas

OCC Formal Agreement
The bank was required to develop and implement a written audit program that contained internal controls and independent testing to ensure compliance with BSA including the filing of SARs.

Guaranty National Bank
Tallahassee, Florida

OCC Formal Agreement
The bank was required to develop a detailed written program of policies and procedures that contains at a minimum nine specific points listed in the Agreement. The bank was also required to appoint a BSA Compliance Officer who reports directly to the Board of Directors.

Nara Bank, N.A.
Los Angeles, California

OCC Cease and Desist Order
The bank was required to adopt written policies and procedures almost identical to those of Guaranty National Bank discussed above, with the addition of specific OFAC rules and regulations and policies and procedures to address unique or special risks posed by particular branches of the bank due to type or volume of business activity at the branch.

Sequoia National Bank
San Francisco, California

OCC Cease and Desist Order
The bank was required to develop a comprehensive BSA training program for all personnel and operational procedures for opening new accounts and the monitoring of high-risk accounts, including the identification and designation of customer exemptions to BSA.

Bank of the Orient
San Francisco, California

FRB Cease and Desist Order
The terms of the Order required the bank to hire an independent consultant acceptable to the FRB to conduct a comprehensive forensic review of the bank's anti-money laundering compliance for the last three years and to make recommendations for new policies and procedures, including procedures to comply with the USA PATRIOT Act. The bank also was required to develop an acceptable enhanced customer due diligence program designed to insure the timely identification and reporting of known or suspected criminal activity against or involving the bank and an internal BSA compliance program that provided for independent testing and personnel training.

Pedro Cabrera
Former Employee of Banco Mercantil, C.A.,S.A.C.A.
New York, New York

FRB Cease and Desist Order
Mr. Cabrera, a former employee and institution-affiliated party of the bank, agreed to abide by the provisions of the Order relating to his alleged violation of law and unsafe and unsound banking practices in connection with the structuring of cash deposits and money instruments by private banking customers which resulted in violations of the Currency and Foreign Transactions Reporting Act.

Sovereign Bank
Wyomissing, Pennsylvania

FinCEN Assessment of Civil Money Penalty
FinCEN determined that over a two and one-half year period, the bank willfully failed to timely file approximately 2,000 CTRs. The determination was based in part on the bank's failure to implement sufficient internal controls and testing even after it was on notice that there were significant problems with its BSA compliance program. A civil money penalty of $700,000 was assessed against the bank.


First published on BankersOnline.com 6/25/02.

First published on 06/25/2002

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