Compliance Blog

As you may remember, FinCEN and others hammered AmSouth for an allegedly poor BSA/AML program.  Recently, disgruntled AmSouth shareholders sued its board, alleging that the board violated its fiduciary duties with its lax oversight of BSA-related matters.  The case is Stone v. Ritter.

Here's a link to a very good article from the Metropolitan Corporate Counsel that discusses the case in detail.  Here's a link to the case itself.

The board was ultimately vindicated in this case.  The court held:

With the benefit of hindsight, the plaintiffs’ complaint seeks to equate bad outcome with bad faith. The lacuna in the plaintiffs’ argument is a failure to recognize that the directors’ good faith exercise of oversight responsibility may not invariably prevent employees from violating criminal laws, or from causing the corporation to incur significant financial liability, or both, as occurred in Graham, Caremark and this very case. In the absence of red flags, good faith in the context of oversight must be measured by the directors’ actions “to assure a reasonable information and reporting system exists” and not by second-guessing after the occurrence of employee conduct that results in an unintended adverse outcome.

This case or the article might be an interesting case study during BSA training for your board of directors.  Just a thought.