Compliance Blog

Written by Shari R. Pogach, Regulatory Paralegal

In the April 2014 issue of the BSA Blast (member login needed), I wrote on FinCEN’s new push on Bank Secrecy Act (BSA) enforcement.  On April 23, after the BSA Blast was published, FinCEN assessed a civil money penalty against a Florida money services business (MSB), New Milenium Cash Exchange (NMCE) and Flor Angella Lopez, its president and owner, for willful BSA violations.  FinCEN’s action illustrates the importance of a robust anti-money laundering program, adequate training of compliance personnel, independent testing and BSA reporting.  For example:

 â€œâ€¦. The MSB lacked adequate AML programs for its check cashing and money order activities as well as its currency exchange transactions. The policies, procedures and internal controls were inadequate to verify the identities of persons conducting transactions, to monitor for suspicious activities, to identify currency transactions exceeding $10,000, and to ensure that NMCE filed the required currency transaction reports (“CTRs”). The internal controls were also inadequate for creating and retaining adequate Bank Secrecy Act records related to currency exchange. As NMCE’s designated compliance officer, Ms. Lopez never conducted a Bank Secrecy Act/AML risk assessment of the MSB. NMCE’s ability to detect suspicious transactions was adversely affected because no risk assessment was conducted and “red flags” were not included in the MSB’s procedures for each type of business conducted until after May 18, 2011, when a revised AML program was implemented.

NMCE failed to designate a compliance officer suitably knowledgeable of Bank Secrecy Act regulations to assure that the MSB was in compliance with applicable requirements. During the 2011 examination by the IRS SB/SE, Ms. Lopez admitted to lacking specific knowledge of the CTR reporting requirements and the recordkeeping requirement for foreign currency transactions over $1,000. Ms. Lopez also failed to establish an effective AML program, in part, by not recognizing the potential conflicts of interest in establishing a relationship with a consultant that: (1) created NMCE’s written AML program, (2) performed the only independent testing of the AML program, and (3) provided the only source of Bank Secrecy Act training for the MSB.

NMCE failed to provide adequate training and maintain records of such training for the designated compliance officer for several years. Since 2011, it has used a generic module that was provided by the consultant that also created its written AML program. The training was wholly inadequate. It was not comprehensive and was not tailored to the MSB’s specific business lines and associated risks.

NMCE also failed to conduct an independent test of the MSB for more than six years. In 2012, the MSB engaged the same consultant to conduct its first independent test despite the potential conflicts of interest. In summary, NMCE and Ms. Lopez wholly failed to implement an effective AML program.”

[…]

“Since 2010, NMCE has filed 51 CTRs totaling approximately one million dollars. All 51 CTRs were filed significantly late. NMCE, through Ms. Lopez, also failed to file at least 149 CTRs for currency received, or currency disbursed, for exchanges of currency with other financial institutions totaling more than $10,000 from November 2007 through April 2012.This represents a failure to file rate of 75%. The dollar amount involved with these transactions totaled approximately $4.5 million.”

NMCE and Ms. Lopez admitted to violating the BSA’s program, recordkeeping and reporting requirements and consented to a $10,000 civil money penalty. 

Earlier in the week several news outlets reported on a New York Times story about federal prosecutors nearing criminal charges against Credit Suisse for offering tax shelters to Americans and French bank BNP Paribas with doing business with countries such as Sudan and Iran that the U.S. has under blacklist sanctions.  The two cases could produce the first guilty plea from a major bank in more than two decades.  There are also criminal investigations into a fraud at Citigroup’s Mexican affiliate and other American banks.  The new prosecution strategy and direction is to criminally punish banks without putting them out of business and damaging the economy.

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NAFCU Webcast - NCUA & CFPB Updates: What You Need to Know, Now - get a jump on regulatory preparedness with an update on the most critical upcoming NCUA and CFPB regulations.  Join NAFCU’s Regulatory Affairs team on Wednesday, May 7 from 2:00-3:30 pm ET, as they cover what will be new around capital reform, risk-based capital, HDMA, and more.

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Free Resource – List of NCUA’s Required Board Policies!  Earlier this week, Andy Keeney, a nationally-recognized credit union attorney and partner at Kaufman & Canoles, provided an overview of nearly 50 “required” NCUA Board of Director policies during this NAFCU webcast.  If you missed the webcast, don’t fret: all of NAFCU’s webcasts are available for purchase on-demand as well.  Andy is also pretty well known for sharing some great resources in his firm’s Credit Union Legal Update publication.  If you check out the summer 2014 edition of Credit Union Legal Update, you’ll find the updated board policies list that Andy utilized during the above-mentioned NAFCU webcast. 

Take a look here to find other freebie publication resources available on the Kaufman and Canoles website.