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Enforcement Actions and Penalties

Enforcement Actions and Penalties. Wyn Clark U.S. Treasury. Overview. Civil Penalties Criminal Penalties Enforcement Actions OFAC Penalties Examples Money Service Businesses Casinos Case Study. Civil Penalties.

nicholas-simmons
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Enforcement Actions and Penalties

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  1. Enforcement Actions and Penalties Wyn Clark U.S. Treasury

  2. Overview • Civil Penalties • Criminal Penalties • Enforcement Actions • OFAC Penalties • Examples • Money Service Businesses • Casinos • Case Study

  3. Civil Penalties CMPs for banks, employees, partners, directors or officers for BSA/AML related violations or findings • 31 CFR 103.57 – Reporting and Recordkeeping • Up to $100M or amount involved • 12 USC 1955 – Financial Recordkeeping • Up to $10M • 31 USC 5321 Records and Reports on Monetary instrument Transactions • $25M or amount of transaction up to $100M

  4. Criminal Penalties • 31 CFR 103 – Reporting and Recordkeeping • Up to $250M fine • Up to 5 years in prison • Up to $500M and 10 years if pattern of criminal activity • 12 USC 1956 – Financial recordkeeping • Up to $1M fine • Up to 1 year in prison • Up to $10M and 5 years if pattern of criminal activity • 31 USC 5322 Records and Reports on monetary instrument transactions • Person - Up to $500M and 10 years • Institution – Up to $1MM

  5. Communicating Supervisory Concerns • Verbal Comments • Informal with management during exam • Formal with the Board during or after exam • Supervisory letter to management • Finding in Report of Exam or other communication to the Board • Deficiencies or weakness • Violation of regulation(s) • Enforcement Actions

  6. Enforcement Actions • Informal Enforcement Actions • Not serious, but need Board written commitment • Not disclosed to the public • Commitment letters, memoranda of understanding • Formal Enforcement Actions • More serious issues, some enforceable in Federal courts • Disclosed to the Public • Failure to comply can result in CMPs

  7. Enforcement Actions Banks • Cease & Desist Orders (C&D) • Civil Money Penalty Orders (BCMP) • Formal Agreements (FA) • Prompt Corrective Action Directives (PCAD) • Safety & Soundness Orders (SASO) • Securities Enforcement Actions (SEB)

  8. Enforcement Actions Institution Affiliated Parties (IAPs) • 1829 "Removals" (1829) • Cease & Desist Orders against Individuals (PC&D) • CMP Orders against Individuals (CMP) • Formal Agreements (FA) • Removal/Prohibition Orders (REM) • Restitution Orders (REST) • Securities Enforcement Actions against Individuals (SEI)

  9. Joint Interagency Statement Issued by the primary federal bank regulators (FRB, FDIC, OCC, OTS,NCUA) • Provides consistent BSA compliance regulations regarding examinations and BSA compliance requirements • Provides consistent policy under which a Cease and Desist order will be issued • Failure to establish and maintain a BSA compliance program • Failure to correct problem previously reported to the bank

  10. Who can impose enforcement actions and/or CMPs? • FinCEN • Authority under the BSA • Federal Bank Regulators • Authority under • 12 USC 1818(i)(2) • 12 USC 1786(k)(2) • Department of Justice • State Banking Regulators • OFAC • DOJ

  11. FinCEN • 44 cases since 1999 on FinCEN website of enforcement actions • Banks, Casinos, stores, MSBs • www.fincen.gov

  12. OFAC Non-Compliance The Laws - Criminal • Trading With the Enemy Act • 10 years jail, $1 million fine -corp., $100M - individuals • IEEPA – 10 years jail, $50M fine • Foreign Narcotics Kingpin • 30 years jail, $10 million per count • Antiterrorism and Effective Death Penalty Act

  13. OFAC Non-Compliance • Civil • $275,000 per count • IEEPA - $11,000 • TWEA - $50,000 • Kingpin - $1 million

  14. OFAC Penalties CIVIL PENALTIES – INTERIM POLICY • October 16, 2007, the International Emergency Economic Powers Enhancement Act (IEEPA Enhancement Act) • Increased the maximum civil penalty applicable to violations of orders or regulations issued under IEEPA. The new maximum civil penalty is the greater of $250,000 or an amount that is twice the amount of the transaction

  15. OFAC Non-Compliance • Notice of violation • Administrative demand - “602” letter • Pre-penalty notice • Right to respond • Right to agency hearing • Judicial review • Settlement • Talks with OFAC • Still must respond to pre-penalty notice

  16. OFAC Non-Compliance • Blocked Assets • Can credit but cannot debit • Must earn reasonable interest • Application for Specific License • Annually reporting of blocked property

  17. Non-Compliance with SDNTK • These prohibitions affect trade transactions as well as accounts, securities, and other assets. • Corporate criminal penalties for violations of the Foreign Narcotics Kingpin Designation Act range up to $10,000,000; individual penalties range up to $5,000,000 and 30 years in prison. • Civil penalties of up to $1,075,000 may also be imposed administratively. • The Kingpin Act blocks all property and interests in property, subject to U.S. jurisdiction, owned or controlled by significant foreign narcotics traffickers as identified by the President or others such as Secretary of the Treasury.

  18. Examples • United Bank for Africa • FinCEN and OCC • 2 Cease and Desist Orders • 2 CMPs: $500M and $15MM • Reduced to limited services • Union Bank of California, NA • OCC, FinCEN and DOJ • C&D Order and Deferred Prosecution Agreement • $10MM CMP

  19. Examples • Arab Bank, PLC • OCC and FinCEN • $24MM CMP • American Express • Bank: $20MM CMP by FRB and FinCEN • MSB: $5MM CMP by FRB and FinCEN • AMEX: $55MM CMP by DOJ • DOJ: Deferred Prosecution agreement • FRB: Cease and Desist order

  20. Money Services Businesses • Regulated by the IRS • Refers issues to FinCEN • Required to register with FinCEN • Initial • Renewal every 2 years • Penalties • Failure to register or renew can result in both civil and criminal penalties • Violation of BSA and 31 CFR 103.41(e) • CMP of up to $5M per day and possible civil penalty by Secretary of the Treasury • Criminal penalty also possible under 31 USC 5330

  21. Money Services Business Sigue Corporation – January 2008 • $15MM CMP for violations of BSA • Failure to maintain an effective AML Program • Deferred prosecution with DOJ • Agreed to commit an additional $9.7MM to improve AML Program • Dismissal of criminal charges in 12 months if the company implements significant AML steps

  22. Casinos • Internal Revenue Service (IRS) • Primary regulator • Refers issues to FinCEN • Tonkawa Tribe of Oklahoma and Edward E. Street – March 2006 • CMPs: $1MM and $1.5MM respectively • Failure to have adequate AML Program • Using fictitious social security numbers, unreported $300M cash deposit

  23. Case Study U.S. Trust • C&D • CMPs • External Assessment • External Directives • KPMG • Regulators • AML Division • Reporting Lines • Remediation • Monitoring

  24. Questions

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