Enforcement Actions and Penalties
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Transcript of Enforcement Actions and Penalties
Enforcement Actions and Penalties
Wyn ClarkU.S. Treasury
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Overview Civil Penalties Criminal Penalties Enforcement Actions OFAC Penalties Examples Money Service Businesses Casinos Case Study
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Civil Penalties
CMPs for banks, employees, partners, directors or officers for BSA/AML related violations or findings
31 CFR 103.57 – Reporting and Recordkeeping Up to $100M or amount involved
12 USC 1955 – Financial Recordkeeping Up to $10M
31 USC 5321 Records and Reports on Monetary instrument Transactions $25M or amount of transaction up to $100M
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Criminal Penalties 31 CFR 103 – Reporting and Recordkeeping
Up to $250M fine Up to 5 years in prison Up to $500M and 10 years if pattern of criminal activity
12 USC 1956 – Financial recordkeeping Up to $1M fine Up to 1 year in prison Up to $10M and 5 years if pattern of criminal activity
31 USC 5322 Records and Reports on monetary instrument transactions
Person - Up to $500M and 10 years Institution – Up to $1MM
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Communicating Supervisory Concerns Verbal Comments
Informal with management during exam Formal with the Board during or after exam
Supervisory letter to management Finding in Report of Exam or other
communication to the Board Deficiencies or weakness Violation of regulation(s)
Enforcement Actions
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Enforcement Actions Informal Enforcement Actions
Not serious, but need Board written commitment
Not disclosed to the public Commitment letters, memoranda of
understanding Formal Enforcement Actions
More serious issues, some enforceable in Federal courts
Disclosed to the Public Failure to comply can result in CMPs
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Enforcement ActionsBanks Cease & Desist Orders (C&D) Civil Money Penalty Orders (BCMP) Formal Agreements (FA) Prompt Corrective Action Directives (PCAD) Safety & Soundness Orders (SASO) Securities Enforcement Actions (SEB)
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Enforcement ActionsInstitution Affiliated Parties (IAPs) 1829 "Removals" (1829) Cease & Desist Orders against Individuals
(PC&D) CMP Orders against Individuals (CMP) Formal Agreements (FA) Removal/Prohibition Orders (REM) Restitution Orders (REST) Securities Enforcement Actions against
Individuals (SEI)
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Joint Interagency Statement
Issued by the primary federal bank regulators (FRB, FDIC, OCC, OTS,NCUA)
Provides consistent BSA compliance regulations regarding examinations and BSA compliance requirements
Provides consistent policy under which a Cease and Desist order will be issued
Failure to establish and maintain a BSA compliance program
Failure to correct problem previously reported to the bank
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Who can impose enforcement actions and/or CMPs? FinCEN
Authority under the BSA Federal Bank Regulators
Authority under 12 USC 1818(i)(2) 12 USC 1786(k)(2)
Department of Justice State Banking Regulators OFAC DOJ 10
FinCEN
44 cases since 1999 on FinCEN website of enforcement actions Banks, Casinos, stores, MSBs www.fincen.gov
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OFAC Non-Compliance
The Laws - Criminal Trading With the Enemy Act
10 years jail, $1 million fine -corp., $100M - individuals
IEEPA – 10 years jail, $50M fine Foreign Narcotics Kingpin
30 years jail, $10 million per count Antiterrorism and Effective Death Penalty
Act
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OFAC Non-Compliance
Civil $275,000 per count IEEPA - $11,000 TWEA - $50,000 Kingpin - $1 million
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OFAC Penalties
CIVIL PENALTIES – INTERIM POLICY October 16, 2007, the International
Emergency Economic Powers Enhancement Act (IEEPA Enhancement Act) Increased the maximum civil penalty
applicable to violations of orders or regulations issued under IEEPA. The new maximum civil penalty is the greater of $250,000 or an amount that is twice the amount of the transaction
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OFAC Non-Compliance
Notice of violation Administrative demand - “602” letter Pre-penalty notice Right to respond Right to agency hearing Judicial review
Settlement Talks with OFAC Still must respond to pre-penalty notice
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OFAC Non-Compliance
Blocked Assets Can credit but cannot debit Must earn reasonable interest
Application for Specific License Annually reporting of blocked
property
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Non-Compliance with SDNTK These prohibitions affect trade transactions as
well as accounts, securities, and other assets. Corporate criminal penalties for violations of the
Foreign Narcotics Kingpin Designation Act range up to $10,000,000; individual penalties range up to $5,000,000 and 30 years in prison.
Civil penalties of up to $1,075,000 may also be imposed administratively.
The Kingpin Act blocks all property and interests in property, subject to U.S. jurisdiction, owned or controlled by significant foreign narcotics traffickers as identified by the President or others such as Secretary of the Treasury.
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Examples United Bank for Africa
FinCEN and OCC 2 Cease and Desist Orders 2 CMPs: $500M and $15MM Reduced to limited services
Union Bank of California, NA OCC, FinCEN and DOJ C&D Order and Deferred Prosecution
Agreement $10MM CMP
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Examples
Arab Bank, PLC OCC and FinCEN $24MM CMP
American Express Bank: $20MM CMP by FRB and FinCEN MSB: $5MM CMP by FRB and FinCEN AMEX: $55MM CMP by DOJ DOJ: Deferred Prosecution agreement FRB: Cease and Desist order
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Money Services Businesses Regulated by the IRS
Refers issues to FinCEN Required to register with FinCEN
Initial Renewal every 2 years
Penalties Failure to register or renew can result in both civil
and criminal penalties Violation of BSA and 31 CFR 103.41(e) CMP of up to $5M per day and possible civil
penalty by Secretary of the Treasury Criminal penalty also possible under 31 USC 5330
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Money Services Business
Sigue Corporation – January 2008 $15MM CMP for violations of BSA
Failure to maintain an effective AML Program Deferred prosecution with DOJ
Agreed to commit an additional $9.7MM to improve AML Program
Dismissal of criminal charges in 12 months if the company implements significant AML steps
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Casinos
Internal Revenue Service (IRS) Primary regulator Refers issues to FinCEN
Tonkawa Tribe of Oklahoma and Edward E. Street – March 2006 CMPs: $1MM and $1.5MM respectively Failure to have adequate AML Program Using fictitious social security numbers,
unreported $300M cash deposit22
Case Study
U.S. Trust C&D CMPs External Assessment External Directives
KPMG Regulators
AML Division Reporting Lines
Remediation Monitoring
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Questions
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