Kingdom Trust Company pays $1.5M BSA penalty
The Kingdom Trust Company is a South Dakota-chartered trust company with headquarters in Sioux Falls, South Dakota, that maintains a trust services office in Murray, Kentucky, where most of its 80 employees work. Kingdom Trust’s current primary offering is the provision of custody services to individuals with self-directed individual retirement accounts (IRAs), as well as acting as a qualified custodian for investment advisers. However, during the Relevant Time Period (2/15/2016 – 3/15/2021), Kingdom Trust also engaged in the business of providing account and payment services to foreign securities and investment firms as well as other businesses—including money services businesses—located in Latin America that had elevated risks of money laundering.
FinCEN has issued Kingdom Trust a consent order for the payment of a $1,5 million civil money penalty for having deficient processes for identifying and reporting suspicious activity. The consent order describes Kingdom Trust's process as "severely underdeveloped and ad hoc, resulting in ... willful failure to timely and accurately file SARs." Bank personnel with AML responsibilities "have acknowledged not fully understanding federal SAR filing requirements and that they may have missed important information about some of their riskiest clients as the result of maintaining other, non-AML responsibilities." The bank also failed to recruit sufficient personnel with experience in AML compliance, including SAR filing responsibilities, even after Kingdom Trust expanded into a new line of business offering services to customers that had elevated risks of money laundering."
FinCEN determined that Kingdom Trust willfully violated the BSA and its implementing regulations during the Relevant Time Period. Specifically, FinCEN has determined that Kingdom Trust willfully failed to accurately and timely report suspicious transactions to FinCEN, in violation of 31 U.S.C. § 5318(g) and 31 C.F.R. § 1020.320. At a high level: (1) Kingdom Trust expanded into a new line of business that involved customers with elevated risks of money laundering without considering the resources required to identify and report suspicious transactions for those customers; (2) Kingdom Trust maintained a manual process that was inadequate to identify and report suspicious transactions given the growing volume of transactions it was processing as a result of this international line of business expansion; and (3) Kingdom Trust failed to file SARs on hundreds of transactions that FinCEN was able to readily identify as suspicious based on the parameters set forth in 31 C.F.R. § 1010.320(a).