InfoBytes Blog
FinCEN fines trust company $1.5 million for BSA violations
On April 26, FinCEN announced its first enforcement action against a trust company, in which it assessed a $1.5 million civil money penalty against a South Dakota-chartered trust company for willful violations of the Bank Secrecy Act (BSA) and its implementing regulations. According to the consent order, the trust company admitted that it willfully failed to timely and accurately report hundreds of transactions to FinCEN involving suspicious activity by its customers, including transactions with connections to a trade-based money-laundering scheme and several securities fraud schemes. The agency cited the trust company’s “severely underdeveloped” process for identifying and reporting potentially suspicious activity as part of “an overall failure to build a culture of compliance.”
According to FinCEN acting Director Himamauli Das, the trust company “had virtually no process to identify and report suspicious transactions, resulting in it processing over $4 billion in international wires with essentially no controls.” FinCEN said that the trust company should have realized that a large volume of activity from high-risk customers played a role in the closure of numerous correspondent accounts it maintained at other financial institutions, and pointed out that the trust company only began closing accounts flagged during an audit after several forced closures of its own accounts by other financial institutions and after receiving law enforcement inquiries about the accounts referred by the audit. However, at the time, the trust company made no effort to file suspicious activity reports (SARs), FinCEN found, claiming that the trust company processed hundreds of suspicious transactions worth tens of millions of dollars for risky customers that, among other things, appeared to operate in unrelated business sectors. FinCEN added that “personnel with [anti-money laundering (AML)] responsibilities have acknowledged not fully understanding federal SAR filing requirements and that they may have missed important information about some of their riskiest clients as the result of maintaining other, non-AML responsibilities.”
The consent order requires the trust company to hire an independent consultant to review its AML program and transactions from all referenced accounts, as well as any other accounts the trust company maintained for customer referrals, and conduct a SAR lookback review. The trust company is also required to implement recommendations made by the independent consultant and file SARs for any flagged covered transactions. FinCEN recognized the close collaboration and assistance provided by the DOJ and the FBI on this matter.