dollars. The attorney is now serving a 50
year sentence for his part in the scheme.
3. January 2014—Old National Bank,
Evansville, Indiana: 3
This bank was cited for pillar violations
that led to not conducting adequate risk
assessments, implementing suspicious
activity monitoring systems, properly
identifying high risk customers, deficient internal audit and a look back for
suspicious activity even found that 110
SARs needed to be filed and another 172
supplemental SARs needed to filed. The
CMP in this case was $500,000 for a bank
with over $8 billion in assets and over
160 locations.
4. January 2014—JP Morgan Chase
Bank: 4
The continual investigation into the Bernie Madoff scandal that swept so many
into its ugly snare, seems to have no end.
The OCC determined that sufficient
controls were not in place to identify the
activity; there were less than satisfactory
risk assessment processes and enterprise-wide policies and procedures. $150
billion in suspect funds were funneled
through the bank accounts alone. The
Department of Justice (DOJ) agreed to
a two year deferred prosecution agreement. The civil money penalty from the
OCC was $350,000, and an additional
$1.7 billion forfeiture to the DOJ and
other reparations bringing the total penalties to over $2 billion. This was also the
largest bank forfeiture and penalty to the
DOJ for BSA violations.
Despite the size of an institution,
there are areas that can become issues. It
is possible that these banks had decent
programs at one time, and changes occurred over time with the introduction
of new products or services, and acquisitions. On the other hand, each bank also
had some issues long before the regulators could tolerate any more.
Changes on the Horizon
The BSA/AML enforcement actions are
a bit different in reputation risk. The
consumer protection area is bad enough
if a consumer files a complaint based
on discrimination, unfair treatment, or
pure compliance area. The BSA/AML
area that takes on a different significance
in the safety and soundness risk as well,
since all banks have been unofficially
deputized into law enforcement by BSA
regulation. Because of the recent high
profile cases in the media, Congress has
finally become alarmed publicly and
wants to address perceived loopholes in
the current regulations. Representative
Maxine Waters (D-CA), has sponsored
H.R. 3317, the “Holding Individuals
Accountable and Deterring Money
Laundering Act” and it is working its
way through Congress. This pending
legislation addresses major enhance-
ments to the existing BSA penalty and
enforcement structure regarding non-
compliance, and community banks will
be caught up once again in the same net
as the Dodd-Frank Act concept of “We
didn’t cause it but we all have to live
with the consequences”.
Some of the key issues in this pro-
posal are aimed at giving the govern-
ment the ability to deal with bank
executives at the helm when BSA viola-
tions are discovered, and then being
able to go after them personally with
prosecution authority. FinCEN would
be granted independent litigation au-
thority and would not have to depend
on the DOJ to take legal action. The
civil money penalties would increase
from a maximum of $100,000 to $10
million. The maximum prison term
would go from 5 to 20 years, and senior
management must certify receipt of
BSA compliance reports to ensure in-
volvement and awareness regarding any
program deficiencies
Modern whistleblower protections
would be implemented, along with other
proposed changes. With the current
regulatory environment, this should not
have been a total surprise. In a recent
discussion with an OCC regulator in
Washington, DC, the legislation has had
recent progress, and the perception in
the regulatory community is that the
proposal may be finalized in a version
similar to the proposed form.
Hindsight
Hindsight is always 20/20. Surely, insti-
tutions under a consent order to deal
with the resulting reputation issues, the
stigma of a large BSA/AML enforcement
action, and civil money penalty, are in
agreement. No one is picking on any
one institution, but everyone would be
wise to read these documents and heed
their warning. We must learn from their
mistakes and take to heart the valuable
details the regulators leave in the docu-
ments. These details are made public for
a reason––partly to chastise, and partly
to inform and warn.
We are all charged with the task of
making the financial system within our
borders the safest possible, with the sys-
tems under our control. And with a clear
vision of what our jobs entail, along
with the obstacles other institutions have
faced, we can make the vision clearer in
our own shops with the unsuspecting
and unintended help from others. ■
Endnotes
1 FinCEN Assessment of Civil Money Penalty,
Sept., 24, 2013, available at: http://www.fincen.
gov/pdf/SRVB_Assessment_092413.pdf
2 FinCEN Assessment of Civil Money Penalty,
Sept. 23, 2013, available at: http://www.fincen.
gov/pdf/TD_ASSESSMENT_09222013.pdf
3 OCC Consent Order for a Civil Money Penalty,
Jan. 7, 2014, available at: http://www.occ.gov/
static/enforcement-actions/ea2014-006.pdf
4 FinCEN Assessment of Civil Money Penalty,
Jan. 7, 2014, available at: http://www.
fincen.gov/news_room/ea/files/JPMorgan_
ASSESSMENT_01072014.pdf
ABOUT THE AUTHOR
MAUREEN E. CAROLLO,
CRCM, is SVP, BSA Officer, and
Associate Director of
Compliance for Bank SNB, a
regional community bank
with locations in Oklahoma, Kansas and
Texas. She is a graduate of the
Southwestern Graduate School of Banking
at SMU in Dallas, Texas, and serves on the
ABA Bank Compliance magazine Editorial
Advisory Board, the ABA Regulatory
Compliance Conference Advisory Board and
the Oklahoma Bankers Association
Compliance School Board. She can be
reached at maureencarollo@banksnb.com.
