Be Proactive with Your BSA Program to Avoid Hefty Regulatory Penalties
The number of regulatory enforcement actions and inspections have continued to rise. If you’re a financial institution of any sort, that’s an unsettling thing to hear. According to a survey published by PwC earlier this year, 32% of participants were either currently under an enforced remediation program or received a regulatory inspection with major feedback to address. Additionally, 54% of participants said they expect more changes in the regulatory environment to directly impact their organization in the next 2 years.
As regulatory scrutiny increases for financial institutions, enforcement actions resulting in civil money penalties are only growing both in size and frequency.
In February 2018, FinCEN published an additional $185 million civil money penalty against a major bank in the United States due to willfully violating the BSA’s program and reporting requirements over a 4-year period. The bank made the following violations:
- Capping the number of alerts its automated transaction monitoring system would generate for investigations;
- Allowed non-customers to conduct currency transfers at its branches through a large money transmitter;
- Employed inadequate procedures to identify and address high-risk customers which in turn caused it to fail to effectively analyze and report the transactions of such customers;
- Filed thousands of currency transactions reports (CTRs) that provided materially inaccurate information to FinCEN.
These violations were enforced after both institutions failed to develop and implement an anti-money laundering program with an emphasis on internal controls, customer due diligence program, independent validation, violated the requirement to file CTRs and to report suspicious transactions.
In May 2018, the Financial Crimes Enforcement Network (FinCEN) issued an $8 million civil money penalty against a casino in California due to multiple BSA violations. It was determined that the casino willfully violated the BSA’s program and reporting requirements over almost a 9-year period. The casino failed to:
- Implement an adequate system of internal controls;
- Conduct adequate independent testing;
- Report suspicious transactions involving AJC chips used to facilitate loan-sharking.
FinCEN determined that the casino willfully violated the BSA and its regulations resulting in a multi-million-dollar fine.
These numbers and enforcement actions can seem scary and daunting – especially as BSA officers are also being held personally liable for violations.