Skip to main content
Menu Icon Menu Icon

In The News

Daniel P. Stipano quoted in ACAMS article, “Court ruling confirms power of US federal AML examination manual”


Daniel P. Stipano

Daniel P. Stipano was quoted on May 4, 2018 in an ACAMS article, “Court ruling confirms power of US federal AML examination manual,” which discussed the legal battle with California Pacific Bank over the FFIEC manual and its enforcement of the Bank Secrecy Act. The article also discussed the 9th US Circuit Court of Appeal’s recent ruling that confirms that the manual contains significant power and can be seen as regulation. The article stated, “In December 2012, during the examination of California Pacific Bank that first prompted the legal challenge, the FDIC found violations of all “four pillars” of an effective AML program as required by regulations: written internal policies and procedures, designation of a qualified compliance officer, adequate training of staff and independent testing. Richard Chi, then the bank’s chief executive officer, had named his son, Alan, as acting BSA officer the prior year without interviewing other candidates for the role, according to the 9th Circuit ruling. The bank’s board later confirmed Alan Chi’s appointment despite his dearth of relevant experience and his conflicting duties as the lender’s chief financial officer and internal auditor. Chi proceeded to rate the AML risk that California Pacific Bank’s had to manage as low, similarly downplayed the risks posed by new accountholders, then failed to file a suspicious activity report on relevant transactions after the lender was subpoenaed for client details during an FBI investigation into espionage and misuse of trade secrets. When the FBI warned Chi not to disclose the existence of the subpoenas in August 2011— the same month he became head of BSA compliance—he mistakenly believed that filing a SAR would contravene the bureau’s instructions.”   

Stipano added, “Banks rarely appeal against a cease and desist order for fear of damaging their relationship with regulators, and the decision against California Pacific Bank may discourage similarly predicated legal challenges.” He also noted, “I think the real significance of the decision is that it effectively gives the manual the weight of law. It’s saying that what’s in the manual is not mere guidance, they are not suggestions, this is something that you have to do—and it puts you on notice on what the requirements are.”

Click here to read the full article.