FinCrimes Webinar Series Recap: Conducting an Effective Financial Crimes-Related Internal Investigation

BuckleySandler hosted a webinar, Conducting an Effective Financial Crimes-Related Internal Investigation, on April 23, 2015 as part of their ongoing FinCrimes Webinar Series.  Panelists included John Mackessy, Anti-Money Laundering & Trade Sanctions Officer at MasterCard and Saverio Mirarchi, Senior Director at Treliant Risk Advisors and former Chief Compliance and Ethics Officer at Northern Trust.  The following is a summary of the guided conversation moderated by Jamie Parkinson, partner at BuckleySandler, and key take-aways you can implement in your company. To request a recording of this webinar, please email Nicole Steckman at nsteckman@buckleysandler.com.

Key Tips and Take-Aways:

  1. Make sure that the organization has appropriate policies and procedures in place to quickly and efficiently react when an investigation begins.
  1. Have systems in place to quickly identify the veracity of any allegations and be prepared to begin the internal investigation as soon as possible.
  1. Be prepared for, and understand the impact of having, a compliance monitor as part of any settlement agreement.

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FinCEN Resolves First Enforcement Action Against Virtual Currency Exchange

On May 5, a virtual currency company and its subsidiary agreed to pay a $700,000 civil money penalty for violating multiple provisions of the Bank Secrecy Act (BSA), in which both companies acted as a money service business and seller of virtual currency without properly registering with FinCEN, as well as, failed to implement and maintain an adequate anti-money laundering (AML) program. Furthermore, according to a Statement of Facts and Violations, FinCEN also charged the subsidiary for not filing or untimely filing suspicious activity reports related to several financial transactions. In addition to the civil money penalty, terms of the agreement require both companies to, among other things, (i) engage in remedial steps to ensure future compliance with AML statutory obligations; and (ii) enhance their current internal measures for compliance with the BSA. In a separate DOJ announcement, both companies entered into a settlement agreement to resolve potential criminal charges with the U.S. Attorney’s Office in the Northern District of California. Under terms of the DOJ settlement, both companies agreed to forfeit a total of $450,000, which will be credited to satisfy FinCEN’s $700,000 penalty, in exchange for the government not criminally prosecuting the companies for the aforementioned conduct.

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FinCEN Eyes Real Estate Industry For Money Laundering Concerns

On May 6, FinCen Director Jennifer Calvery delivered remarks at the West Coast AML Forum, highlighting the agency’s increased focus to ensure transparency within the U.S. financial system. In her remarks, Calvery addressed concerns about potential money laundering activities in the real estate market, particularly for persons involved in real estate closings and settlements. The continued use of shell companies by criminals to purchase luxury residential real estate is of particular concern. Of note, Calvery referenced prior FinCEN efforts to define the scope of BSA obligations involving real estate closings and settlements, and that it has thus far deferred issuing rules likely to cover settlement and closing attorneys and agents, appraisers, title search and insurance companies, escrow companies, and possibly mortgage servicers and corporate service providers until it better identifies the money laundering risks and activities involved. Calvery also described criminal organizations’ use of third-party money launderers, such as accountants or attorneys, to obtain access to U.S. financial institutions, stating “[FinCEN] cannot permit institutions and their associated [third-party money launderers] to act as gateways to the U.S. financial system for criminal and other bad actors.” Calvery also provided an update on FinCEN’s current efforts to address beneficial ownership and ensure BSA compliance in the virtual currency market using the recent Ripple enforcement action as an example.

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DOJ Assistant AG Delivers Remarks on Anti-Money Laundering and Financial Crimes

On March 16, DOJ Assistant AG Leslie Caldwell delivered remarks at the annual ACAMS anti-money laundering conference regarding the importance of establishing and maintaining robust compliance programs within financial institutions to prevent criminal activity, and recent DOJ enforcement actions taken against financial institutions in the anti-money laundering space. Caldwell outlined the integral parts of an effective compliance program, to include: (i) providing sufficient funding and access to essential resources; (ii) incentivizing compliance and ensuring that disciplinary measures are even handed for low-level and senior employees; and (iii) ensuring that third parties interacting with the institutions understand the institution’s expectations and are serious about compliance management. Caldwell emphasized that the strength of an institution’s compliance program is “an important factor for prosecutors in determining whether to bring charges against a business entity that has engaged in some form of criminal misconduct.” Caldwell highlighted the Criminal Division’s recent actions involving financial fraud and sanctions violations, observing that many have resulted in deferred prosecution agreements or non-prosecution agreements (DPAs and NPAs), enforcement tools the DOJ utilizes in the Criminal Division’s cases. Finally, addressing concerns that the DOJ and other law enforcement authorities have targeted the financial industry for investigation and prosecution, Caldwell stated, “banks and other financial institutions continue to come up on our radar screens because they, and the individuals through which they act, continue to violate the law, maintain ineffective compliance programs or simply turn a blind eye to criminal conduct to preserve profit.”

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FinCEN Assesses $75,000 Penalty Against Check Casher Business for Violating Anti-Money Laundering Laws

On March 18, the Financial Crimes Enforcement Network (FinCEN) assessed a $75,000 civil money penalty against a Colorado check casher and its general manager and ordered it to cease all business activities for “willfully violating” registration, reporting, and anti-money laundering provisions of the Bank Secrecy Act (BSA).  The Colorado-based check casher had been the subject of three BSA compliance examinations by the Internal Revenue Service, “all of which found significant and repeated violations.” Under the BSA, money services business are required to implement anti-money laundering controls, conduct internal compliance reviews, and provide compliance training for all staff in an effort to prevent the facilitation of money laundering and the financing of terrorist activities. The Colorado check casher failed to employ such programs, which resulted in a significant amount of untimely and inaccurate currency transaction reports.

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New York DFS Takes Action Against Bank for BSA/AML Compliance Deficiencies

On March 12, the New York DFS issued a consent order against a Germany-based global bank for alleged Bank Secrecy Act and other anti-money laundering (BSA/AML) compliance violations that occurred between 2002 and 2008. According to the DFS’s press release, certain bank employees were selected “to manually process Iranian transactions — specifically, to strip from SWIFT payment messages any identifying information that could trigger OFAC-related controls and possibly lead to delay or outright rejection of the transaction in the United States.” The DFS also alleges that the bank’s New York branch failed to implement proper BSA/AML compliance thresholds, allowing certain alerts regarding suspicious transactions to be excluded. Under the terms of the consent order, the bank must pay a $1.45 billion penalty, to be distributed as follows: $610 million to the DFS; $300 million to the U.S. Attorney’s Office for the Southern District of New York; $200 million to the Federal Reserve; $172 million to the Manhattan District Attorney’s Office; and $172 million to the U.S. DOJ. Additionally, the order requires that the bank “terminate individual employees who engaged in misconduct, and install an independent monitor for Banking Law violations in connection with transactions on behalf of Iran, Sudan, and a Japanese corporation that engaged in accounting fraud.”

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OCC Comptroller Delivers Remarks Regarding BSA/AML Compliance

On March 2, OCC Comptroller Curry delivered remarks before the Institute of International Bankers regarding BSA/AML compliance obligations for financial institutions. During his remarks, Comptroller Curry emphasized that a top priority for the OCC has been to strengthen BSA/AML compliance at its supervised institutions. In this regard, the OCC has (i) modified  its bank examination process so that BSA deficiencies receive proper emphasis in the evaluation of safety and soundness; (ii) focused on the BSA/AML risks posed by  third-party relationships; (iii) required that institutions adequately resource their  BSA/AML compliance programs; (iv) required institutions to assign accountability for BSA/AML compliance across all business lines presenting BSA/AML risk; and (v) taken enforcement action to enforce BSA/AML compliance when appropriate. Through his remarks, Comptroller Curry also addressed the need to improve the BSA/AML regulatory framework itself. Specifically, Comptroller Curry indicated that the OCC wanted (i) to streamline the SAR reporting process, (ii) to find better ways to use technology to advance BSA/AML goals, and (iii) to increase information sharing by creating safe harbors from civil liability both for financial institutions that file SARs and for financial institutions that share information about financial crimes with each other.

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New York Bank Regulator Considering Cybersecurity Regulations, Random Audits of Banks

On February 25, New York DFS Superintendent Benjamin Lawsky delivered remarks at Columbia Law School focusing on how state bank regulators can better supervise financial institutions in a post-financial crisis era.  In his remarks, Lawsky stated that “real deterrence” to future misconduct “means a focus not just on corporate accountability, but on individual accountability” at the senior executive level. Lawsky also highlighted measures that DFS is considering to prevent money laundering including conducting random audits of regulated firms’ “transaction monitoring and filtering systems” and making senior executives attest to the adequacy of the systems. Lastly, Lawsky outlined several cybersecurity initiatives and considerations that would require third-party vendors to have cybersecurity protections and regulations in place that would mandate the use of “multi-factor authentication” systems for DFS regulated firms.

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FinCEN Fines Atlantic City Casino $10 Million for AML Deficiencies

Earlier this month, an Atlantic City-based casino was fined $10 million for violating the BSA – more specifically, for failing to (i) create and implement an adequate anti-money laundering program; (ii) establish an effective system of internal controls; and (iii) adequately file currency transaction reports or maintain other required records. Many of the violations that occurred in 2010 through 2012 were previously identified by regulators and brought to the attention of the casino. The federal government will not collect the $10 million civil penalty, but will receive an unsecured claim in the casino’s bankruptcy, pending approval from the bankruptcy judge.

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FinCrimes Webinar Series Recap: Individual Liability – FinCrimes Professionals in the Spotlight

BuckleySandler hosted a webinar, Individual Liability: Financial Crimes Professionals in the Spotlight, on January 22, 2015 as part of its ongoing FinCrimes Webinar Series. Panelists included Polly Greenberg, Chief, Major Economic Crimes Bureau at the New York County District Attorney’s Office, Richard Small, Senior Vice President for Enterprise-Wide AML, Anti-Corruption and International Regulatory Compliance at American Express, and Michael Zeldin, Special Counsel at BuckleySandler. The following is a summary of the guided conversation moderated by Jamie Parkinson, Partner at BuckleySandler, and key take-aways you can implement in your company.

Best Practice Tips and Take-Aways:

  • Be completely transparent with senior management and your board of directors when escalating issues and concerns. Document your requests for program enhancements and management responses.
  • Assure yourself that your team is up to the task at hand, adequately resourced and knows that they can escalate anything that concerns them to compliance and/or senior management/the Board.
  • When considering the quality of your compliance program, be sure that your program is tested internally by your compliance function, tested again by your organization’s internal audit team, and in addition is examined every few years by external counsel/consultant.
  • If confronted with management unwillingness to commit adequate headcount and resources necessary to the compliance program, serious consideration has to be given to resigning and/or reporting these deficiencies.

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FinCEN Fines NY-Based Securities Broker-Dealer for Anti-Money Laundering Shortfalls

On January 27, FinCEN fined a New York securities broker-dealer firm $20 million for violating the BSA. According to the press release, the firm failed to (i) establish an adequate anti-money laundering program; (ii) conduct proper due diligence on a foreign correspondent account; and (iii) comply with Section 311 of the USA Patriot Act. These failures resulted in customers engaging in suspicious trading, including prohibited third-party activity and illegal penny stock trading, without it being detected or reported. The firm must pay $10 million of the $20 million penalty to the US Department of the Treasury. The remaining $10 million will be paid to the SEC to settle a parallel enforcement action.

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Australian AML Regulator Fines Company For Failing to Register Affiliates

On January 21, the Australian Transaction Reports and Analysis Centre (AUSTRAC) announced a $122,400 penalty (Australian dollars) against a large financial services company for failing to register six affiliate businesses as remittance services providers. AUSTRAC serves as Australia’s regulator of anti-money laundering and counter-terrorism financing activities. AUSTRAC noted the company’s voluntary disclosure was taken into consideration when determining its enforcement approach.

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FinCEN Fines Former CCO For Maintaining Ineffective AML Program

Recently, FinCEN announced a $1 million civil money penalty against the former Chief Compliance Officer (CCO) of a large financial services company for allegedly violating the Bank Secrecy Act (BSA) and its implementing regulations. In its complaint, FinCEN alleges that the CCO, from 2003 through 2008, failed to implement and maintain an effective AML program and file timely Suspicious Activity Reports as required by the BSA. As a result, the company’s money transfer system was used to carry out fraudulent activities causing customers to incur substantial losses. In addition to the penalty, FinCEN is seeking to prohibit the former CCO from participating, directly or indirectly, in the affairs of any financial institution.

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FinCrimes Webinar Recap: Dealing with PEPs – AML & Corruption Risks

BuckleySandler hosted a webinar, Dealing with PEPs: AML & Corruption Risks, on December 18, 2014 as part of its ongoing FinCrimes Webinar Series. Panelists included Mary Butler, Deputy Chief, International Unit, at the Asset Forfeiture & Money Laundering Section, Criminal Division at the U.S. Department of Justice; Paul Dougherty, Managing Director of the anti-money laundering program for the United States and Canada at Bank of America; and Noreen Fierro, Vice President and Chief Compliance Officer of the Group Insurance Division of Prudential Financial. The following is a summary of the guided conversation moderated by Jamie Parkinson, partner at BuckleySandler, and key take-aways you can implement in your company.

Key Tips and Take-Aways:

  1. Make sure that the organization has appropriate procedures in place to identify Politically Exposed Persons (PEPs) and that those procedures appropriately explain how a PEP is defined by the institution.
  1. Understand the different global standards for PEP compliance and, where appropriate, have country-specific policies and procedures to manage onboarding and monitoring.
  1. Encourage cooperation among the different financial crime compliance disciplines within your institution to assist in identifying and monitoring PEPs.

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FDIC Orders Maryland-Based Bank to Improve Its BSA/AML Compliance Program

On December 24, a Maryland-based bank entered into an FDIC consent order involving alleged deficiencies in its BSA/AML compliance program. The consent order requires that the bank’s board of directors increase its oversight of the bank’s BSA compliance program. In addition, under the consent order, the bank must (i) appoint a qualified BSA officer and (ii) conduct a retrospective review of currency transaction reports beginning in May 2013 until the effective date of the consent order to determine whether transactions were properly identified and reported.

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