BSA/AML Violations Can Cost You!
Written by Shari R. Pogach, Regulatory Paralegal, NAFCU
Recently the Financial Crimes Enforcement Network (FinCEN) made its annual inflation adjustment to its civil monetary penalty amounts. News headlines are full of the large institutional fines but you must remember under various statutes, credit unions and individuals are subject to criminal and civil liability for violating anti-money laundering and terrorist financing laws. And, these penalties can be severe. The Federal Financial Institutions Examination Council (FFIEC) Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual outlines potential penalties:
"A person convicted of money laundering can face up to 20 years in prison and a fine of up to $500,000. Any property involved in a transaction or traceable to the proceeds of the criminal activity, including property such as loan collateral, personal property, and, under certain conditions, entire bank accounts (even if some of the money in the account is legitimate), may be subject to forfeiture. ... the U.S. Department of Justice may bring criminal actions for money laundering that may include criminal fines, imprisonment, and forfeiture actions. In addition, banks risk losing their charters, and bank employees risk being removed and barred from banking."
Criminal penalties can be assessed for willful BSA regulation violations. Any individual, including a credit union employee, found guilty of this is subject to criminal fines of up to $250,000 or five years in prison, or both. If the individual commits a willful BSA violation while breaking another law or committing other criminal activity, he or she is subject to a fine of up to $500,000 or ten years in prison, or both. Violations of certain BSA provisions or special measures can make an institution subject to a criminal money penalty up to the greater of $1million or twice the value of the transaction.
The federal banking agencies and FinCEN have the authority to bring civil money penalty actions for BSA violations. In addition to criminal and civil money penalty actions, individuals can be removed from banking for violation of anti-money laundering laws "as long as the violation was not inadvertent or unintentional.
Here is a chart of the updated penalty amounts:
Although it hasn't been updated with the new amounts as yet, this IRS webpage has a nice breakdown of BSA penalties with charts indicating the types of violations and who or what is subject to the penalty.
Three trends can be found in BSA enforcement: 1) an increase in the frequency and size of penalties; 2) an emphasis on the acceptance of responsibility by institutions; and 3) the increased risk of individual liability. Remember FinCEN's $1 million civil money penalty against Thomas Haider? Haider was the former chief compliance officer of MoneyGram International. FinCEN found Haider guilty of willful violations of BSA program requirements and not filing suspicious activity reports. FinCEN's enforcement action was brought before the courts over the application of the BSA to individuals. The court found in favor of FinCEN and that Haider could be held liable for violations of the BSA's AML program requirements. As a result, some regulators are now pursuing other BSA enforcement actions against individual compliance officers.
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