A series of recent federal enforcement actions targeting weaknesses in Bank Secrecy Act/anti-money laundering (BSA/AML) compliance programs continued on March 16, when US Gold refinery Elemetal LLC, based in Dallas, Texas, pled guilty in US District Court for the Southern District of Florida to a single-count information charging failure to maintain an adequate BSA/AML program.

Elemental admitted that from August 2012 through November 2016, it purchased and refined billions of dollars of gold from countries around the world, but willfully failed to develop, implement, and maintain an adequate BSA/AML compliance program, despite the high risk of gold-based money laundering.  The international gold trade is recognized as a common method for laundering illegally mined gold, narcotics and other criminal proceeds.

Federal prosecutors alleged and Elemetal admitted that they had:
Continue Reading Texas-Based U.S. Gold Refinery Pleads Guilty for Failing to Maintain an Adequate Anti-Money Laundering Program and Agrees to Forfeit $15M, Continuing Trend of Criminal Enforcement Actions and Prosecutions for Compliance Failures

On February 13, 2018, the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM), pursuant to Section 311 of the PATRIOT Act, seeking to prohibit the opening or maintaining of a correspondent account in the United States for, or on behalf of, ABLV Bank, located in

Steptoe’s Jack Hayes, Brian Egan, Ed Krauland, Jason Weinstein, and Alan Cohn co-authored an article for The Banking Law Journal titled “Implications for Virtual Currency Exchangers of Significant FinCEN Action Against BTC-e.” The article discusses a civil monetary penalty assessed by the Financial Crimes Enforcement Network against Canton Business Corporation (BTC-e), one of

On November, 1, 2017, the US Department of the Treasury, Financial Crimes Enforcement Network (FinCEN), announced that Lone Star National Bank (Lone Star), operating in Texas, entered into a civil money penalty consent for alleged willful violations of the Bank Secrecy Act (BSA) and 31 C.F.R. Chapter X regulations involving inadequate anti-money laundering (AML) compliance program systems.  This action primarily related to requirements for high-risk foreign correspondent account banking services.  Lone Star, a privately held depository institution, agreed to pay a $2 million civil money penalty to resolve the matter.  FinCEN’s action follows a Consent Order for a Civil Money Penalty in 2015 for $1 million imposed by the Office of the Comptroller of the Currency against Lone Star for alleged programmatic AML deficiencies.

FinCEN asserted that, from 2010-2014, Lone Star failed (i.e., with reckless disregard or willful blindness) to: (1) establish and implement an adequate AML compliance program; (2) conduct required due diligence on a foreign correspondent account; and (3) report suspicious activity.  As a result of these failures, Lone Star’s conduct permitted a foreign financial institution (apparently located in Mexico) to transfer hundreds of millions of US dollars in suspicious bulk cash shipments through the US financial system.  Most notably, Lone Star allegedly had insufficient internal controls and staff inexperienced with the BSA’s obligations.  Consequently, Lone Star did not undertake appropriate due diligence, transaction monitoring, and reporting of suspicious activity, when engaging in high-risk foreign correspondent banking services. 
Continue Reading Who’s Your Correspondent? FinCEN Penalizes Texas-Based Bank for Bank Secrecy Act Violations

Recent joint activity by the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), including joint actions against Venezuela and North Korea, suggest that the two Treasury agencies are increasing coordination to tackle financial and other crimes.

On September 20, 2017, FinCEN issued an advisory which detailed widespread corruption in Venezuela, noting that OFAC has designated a number of Venezuelan public officials for public corruption and narcotics trafficking, including President Nicolas Maduro, Vice President Tareck El Aissami, national assembly leaders, and leaders of national energy company Petroleos de Venezuela (PdVSA).  This tracks a pattern of regular communications and actions by OFAC and FinCEN
Continue Reading FinCEN, OFAC Increase Coordination of Enforcement Activities

The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) assessed a civil monetary penalty of $110,003,314 against Canton Business Corporation (BTC-e) as well as a $12,000,000 penalty against Alexander Vinnik on July 26, 2017.  BTC-e is one of the largest virtual currency exchanges by volume in the world and Vinnik is a Russian

The Financial Action Task Force (“FATF”) has announced the continued suspension of countermeasures against Iran. FATF, the international standards setting body for anti-money laundering (“AML”) and combating the financing of terrorism (“CFT”), maintains a list of high-risk and non-cooperative jurisdictions that may be subject to calls for enhanced due diligence and countermeasures.  Iran was previously

On June 23, 2017, Steptoe’s Blockchain Blog published a piece about the implications of the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017, S. 1241.  The Senate bill was introduced by Senator Grassley (R-IA), along with Senators Feinstein (D-CA), Cornyn (R-TX), and Whitehouse (D-RI), and aims to strengthen criminal money laundering statues

Banamex USA (“BUSA”) has agreed to forfeit $97.44 million and enter into a non-prosecution agreement with the US Department of Justice (“DOJ”) to resolve Bank Secrecy Act (“BSA”) violations.  BUSA is owned by Citigroup Inc. and is a leading money transmitter specializing in sending remittances from the US to Mexico.  The agreement, announced on May 22, also obligates BUSA and Citigroup to report any evidence or allegations of BSA or anti-money laundering (“AML”) violations to DOJ for a one year period.  Additionally, Citigroup must report to DOJ on its efforts to enhance BSA compliance at its subsidiaries.

According to DOJ’s press release, between 2007 and 2012 BUSA’s monitoring system issued alerts on more than 18,000 transactions totaling over $142 million.  Despite these alerts, BUSA initiated less than 10 investigations and filed just nine suspicious activity reports (“SARs”).  No SARs were filed on remittance transactions from 2010 to 2012.  Additionally, BUSA had only two employees with responsibility for BSA/AML compliance and those employees had other time-consuming responsibilities as well.  The DOJ press release further notes that BUSA was aware of the need to improve its BSA/AML compliance program for years, but failed to implement needed enhancements such as adding additional staff.  As part of the agreement, BUSA admitted to willfully failing to maintain an effective AML compliance program and willfully failing to file SARs.  In resolving the matter, DOJ took into account Citigroup and BUSA’s robust remedial actions and cooperation with the investigation.  
Continue Reading Banamex USA Forfeits $97 Million to Resolve Bank Secrecy Act Violations

On May 4, 2017, the Financial Crimes Enforcement Network (“FinCEN”) of the US Department of the Treasury and the US Attorney’s Office for the Southern District of New York announced an agreement with former MoneyGram Chief Compliance Officer Thomas Haider to settle claims under the Bank Secrecy Act (“BSA”). FinCEN initially assessed a $1 million civil monetary penalty against Mr. Haider in December of 2014, which the US Attorney for the South District of New York then sought to enforce in federal court. The case was transferred to the US District Court for the District of Minnesota, where Mr. Haider settled the allegations for $250,000. Under the agreement, Mr. Haider will also be barred from similar jobs for three years. The settlement marks the end of a long running and closely watched money laundering case and, according to a FinCEN spokesman, is one of the largest fines ever imposed against an individual related to failures or omissions under BSA requirements for a financial institution. In November 2012, MoneyGram entered into a separate deferred prosecution agreement with the US Department of Justice, in which it agreed to forfeit $100 million and retain an independent compliance monitor.
Continue Reading Former MoneyGram CCO Settles with FinCEN and US Attorney’s Office