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State Financial Regulators Release BSA/AML Compliance Tool
On February 1, the Conference of State Bank Supervisors (CSBS) announced the release of its BSA/AML Self-Assessment Tool—a new, voluntary tool to help banks and non-depository financial institutions better manage Bank Secrecy Act/Anti-Money Laundering (BSA/AML) risk. Building upon CSBS’s efforts to help banks understand their risk exposure to third-parties, the self-assessment tool—developed jointly by the CSBS and state regulators—aims to help institutions better identify, monitor, and communicate BSA/AML risk, thereby reducing some of the burden and uncertainty surrounding compliance and facilitating more transparency within the financial sector. The self-assessment tool is available for use by any institution and may be accessed here. A narrated tutorial is also available here. Last year, CSBS released a white paper that outlines state supervision of money services businesses.
OFAC Sanctions More than Two Dozen Firms and Individuals in Connection with Iran's Ballistic Missile Program
On February 3, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that it was imposing new sanctions against several entities and individuals involved in procuring technology and/or materials to support Iran’s ballistic missile program, as well as for acting for or on behalf of, or providing support to, Iran’s Islamic Revolutionary Guard Corps-Qods Force. The sanctions block “all property and interests in property of those designated today subject to U.S. jurisdiction are blocked, U.S. persons are generally prohibited from engaging in transactions with” the identified firms and individuals.
Global Money Services Business Reaches Settlements with 49 States and the District of Columbia
On January 31, state attorneys general from 49 states and the District of Columbia announced a $5 million settlement with a global money services business that resolves investigations into allegations that scammers used the company’s wire transfer services to defraud consumers over a period of 9 years. The company agreed to implement an anti-fraud program as part of the settlement, with the settlement funds paying for the states’ costs and fees. As discussed previously on InfoBytes, the company recently entered a $586 million settlement with the DOJ in connection with similar AML-related claims, which will be used for refunds to the victims of fraud-induced wire transfers.
NYDFS Fines German Bank $425 Million for Deficient Money Laundering Controls
On January 30, the New York Department of Financial Services (NYDFS) announced that it had assessed a $425 million fine against a German bank as part of a consent order addressing allegations that the bank allowed $10 billion in “mirror trades” involving Russian investors by failing to properly enforce protections against money laundering. According to the press release, the bank and several of its senior managers allegedly “missed key opportunities to detect, intercept and investigate a long-running mirror-trading scheme facilitated by its Moscow branch and involving New York and London branches.” Specifically, the consent order claims the bank (i) conducted its business in an unsafe and unsound matter; (ii) implemented weak “Know Your Customer” processes; (iii) failed to accurately rate its country and client risks for money laundering throughout the relevant time period and lacked a global policy benchmarking its risk appetite; (iv) maintained ineffective, understaffed anti-financial crime, AML, and compliance units; and (v) had a flawed corporate structure and organization.
In addition to the $425 million monetary penalty, the bank must, within 60 days of the consent order, engage an independent monitor to “conduct a comprehensive review of the [b]ank’s existing BSA/AML compliance programs, policies and procedures.” Furthermore, the bank must submit in writing for NYDFS review an action plan outlining enhancements to its current BSA/AML compliance programs.
Major Regional Bank Agrees to Fix Anti-Money Laundering Controls in Fed/FDIC Orders
On January 27, the Federal Reserve publicly released a cease-and-desist order against a regional bank concerning its anti-money laundering (AML) program. The order, which is dated January 25, requires the bank to address certain deficiencies identified in a review of the bank’s AML compliance program by the Federal Reserve Bank of Richmond and develop a firm-wide compliance risk management program addressing the AML requirements. The order follows a recent Stipulated Order with the FDIC against the same bank concerning similar allegations and calling for, among other things, corrective actions and enhancements to address certain internal control deficiencies.
Coinbase Gets NY BitLicense, Clearance For Its Operations
On January 18, the New York State Department of Financial Services (NYDFS) announced that it had approved the application of Coinbase, Inc., for a virtual currency and a money transmitter license. According to NYDFS, the license was issued to Coinbase—a digital currency wallet that facilitates transactions with Bitcoin and other virtual currencies—only after “a comprehensive review of Coinbase’s applications, including the company’s anti-money laundering, capitalization, consumer protection, and cyber security policies.” Having met the New York regulator’s standards for operations in the state, Coinbase may now operate, under supervision by NYDFS, as a service for buying, selling, sending, receiving and storing Bitcoin.
As previously covered in InfoBytes, NYDFS’s BitLicense framework—which was finalized back in June 2015—requires virtual currency companies to submit a 31-page application providing information covering, among other things: (i) written policies and procedures including, but not limited to BSA/AML, cybersecurity, privacy and information security, (ii) company information, (iii) biographical information on company directors and stockholders, and (iv) an explanation of the methodology used to calculate the value of virtual currency in fiat currency. In addition, the NYDFS released a set of FAQs to help clarify the BitLicense requirements. To date, NYDFS has approved five firms for virtual currency charters or licenses, while denying those applications that did not meet its standards.
Global Money Service Business Settles Alleged AML and Consumer Fraud Allegations; Fined $586 Million in Settlement
On January 19, the DOJ announced that it had entered into Deferred Prosecution Agreement with a global money services business regarding allegations the company failed to maintain effective anti-money laundering program and aiding and abetting wire fraud. The announcement claims that between 2004 and 2012, the company “violated U.S. laws—the Bank Secrecy Act (BSA) and anti-fraud statutes—by processing hundreds of thousands of transactions for Western Union agents and others involved in an international consumer fraud scheme.” Under the terms of the Agreement, the business must forfeit $586 million and “implement and maintain a comprehensive anti-fraud program with training for its agents and their front line associates, monitoring to detect and prevent fraud-induced money transfers, due diligence on all new and renewing company agents, and suspension or termination of noncompliant agents.”
In a related case, the company also agreed to a consent order with the FTC to resolve parallel allegations by the FTC in a complaint filed on January 19 in the U.S. District Court for the Middle District of Pennsylvania. The complaint alleges that the company’s conduct violated Section 5 of the FTC Act and the Telemarketing Sales Rule.
FinCEN Issues Advisory Regarding FATF-Identified Jurisdictions with AML/CFT Deficiencies
As part of the Financial Crimes Enforcement Network’s (FinCEN’s) Financial Action Task Force’s (FATF’s) listing and monitoring process to ensure compliance with its international Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) standards, the FATF identifies certain jurisdictions as having “strategic deficiencies” in their AML/CFT regimes. The identified jurisdictions are listed in either of two documents: (i) the “FATF Public Statement”—which includes jurisdictions that are subject to the FATF’s call for countermeasures or are subject to Enhanced Due Diligence (EDD) due to their AML/CFT deficiencies, and (ii) “Improving Global AML/CFT Compliance: on-going process 21 October 2016”—which includes jurisdictions identified by the FATF to have AML/CFT deficiencies.
On January 19, FinCEN released an advisory updating the list of jurisdictions in which any such “strategic deficiencies” have been identified. FinCen urged financial institutions to consider these lists, including any and all updates thereto when reviewing due diligence obligations and risk-based policies, procedures, and practices.
The jurisdictions identified in the FATF Public Statement included:
- Democratic People’s Republic of Korea, and
- Iran.
The jurisdictions identified in Improving Global AML/CFT Compliance included:
- Afghanistan,
- Bosnia and Herzegovina,
- Iraq,
- Lao PDR,
- Syria,
- Uganda,
- Vanuatu, and
- Yemen.
Notably, Guyana, which was previously listed, has been removed from the October 2016 list.
FINRA Fines Brokerage Firm $5.75M for Lax Anti-Money Laundering Program
On December 28, FINRA entered into an acceptance, waiver, and consent (AWC) agreement with a Puerto-Rican-based brokerage firm based upon allegations that the firm’s anti-money laundering (AML) program “was not reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act.” In deciding to levy a $5.75 million fine, FINRA noted, among other things, that the firm improperly “relied on manual supervisory review of securities transactions” that was “not sufficiently focused on AML risks.” The firm neither admitted nor denied the findings set forth in the AWC agreement, but agreed to address deficiencies in their AML program within 180 days. According to a firm spokeswoman, the firm is “pleased to have this matter from 2013 resolved and we continue to improve, manage and monitor our AML efforts.”
FinCEN Issues Guidance on Sharing Suspicious Activity Reports with U.S. Parents and Affiliates of Casinos
On January 4, the Financial Crimes Enforcement Network (FinCEN) issued guidance to “confirm that, under the Bank Secrecy Act (BSA) and its implementing regulations, a casino that has filed a Suspicious Activity Report (SAR) may share the SAR, or any information that would reveal the existence of the SAR, with each office or other place of business located within the United States of either the casino itself or a parent or affiliate of the casino.” As explained in the guidance, FinCEN expects that the anti-money laundering efforts of the casino’s affiliates could be enhanced by virtue of their access to a clearer and more comprehensive picture of the activities the casino has identified as suspicious. The guidance also specified that casinos may not share SARs or information that would reveal the existence of a SAR with non-U.S. offices or affiliates, individuals or entities within the casino’s corporate famile that perform functions unrelated to gaming, a financial institution without an independent SAR obligation, or unaffialited money services businesses located within the casino. Finally, the guidance specified that a domestic affiliate that receives a SAR or revealing information from a casino may not further share that SAR with an affiliate of its own.