Category Archives: Bank Secrecy Act

“The Big Chill”: Personal Liability and the Targeting of Financial Sector Compliance Officers

by Court E. Golumbic

Introduction   

Prominent law enforcement and regulatory officials have referred to financial sector compliance officers, as “essential partners”[1] in ensuring compliance with relevant laws and regulations, whose “difficult job[s]” merit “appreciat[ion] and respect.”[2] Officials have noted the critical role these professionals play in shaping the culture of financial institutions, as well as the industry more generally.[3] However, a series of recent enforcement actions in which financial sector compliance officers have been personally sanctioned[4] has strained this partnership, fueling concerns among financial sector compliance officers that they are being unfairly targeted.[5]

Law enforcement and regulatory officials have responded to these concerns with assurances that both the ethos of a partnership and their even-handed enforcement approach remain intact.[6] Officials have stressed that in the rare instances in which financial sector compliance officers have been held personally accountable, the majority had engaged in affirmative misconduct.[7] Rarer still, they contend, are cases where compliance officers were found to have exhibited “wholesale” or “broad-based” failures in carrying out responsibilities assigned to them.[8] In these particular cases, officials have stressed that the enforcement actions proceed only when, after carefully weighing the evidence, the facts indicate that the compliance officers “crossed a clear line.”[9] Continue reading

Global Magnitsky Sanctions Target Human Rights Abusers and Government Corruption Around the World

by David S. Cohen, Kimberly A. Parker, Jay Holtmeier, Ronald I. Meltzer, David M. Horn, Lillian Howard Potter, and Michael Romais

On December 20, 2017, President Trump issued a new Executive Order (EO) targeting corruption and human rights abuses around the world.

The EO implements last year’s Global Magnitsky Human Rights Accountability Act (the Global Magnitsky Act), which authorized the president to impose sanctions against human rights abusers and those who facilitate government corruption.[1] The US Department of the Treasury’s Office of Foreign Assets Control (OFAC), which will administer the EO, also added 15 individuals and 37 entities to its Specially Designated Nationals and Blocked Persons List (SDN List). Continue reading

FinCEN Launches New Information-Sharing Platform: The FinCEN Exchange

By David S. Cohen, Franca Harris Gutierrez, Sharon Cohen Levin, Jeremy Dresner, and Michael Romais

Treasury’s Financial Crimes Enforcement Network (“FinCEN”) recently announced the creation of the FinCEN Exchange, a new voluntary platform to facilitate information sharing between the government and industry on topics related to anti–money laundering (“AML”) and other financial crime issues. The program represents a significant step forward on two related priority areas for FinCEN: information sharing and public-private partnerships. Continue reading

New York DFS Pursues $630 Million Fine Against Bank for Alleged Anti-Money Laundering and Sanctions Compliance Failures

By Brad S. Karp, H. Christopher Boehning, Jessica S. Carey, Michael E. Gertzman, Roberto J. Gonzalez, Richard S. Elliott, Rachel Fiorill and Karen R. King

On August 28, 2017, the New York State Department of Financial Services (“DFS”) announced a “Notice of Hearing and Statement of Charges” that seeks to impose a nearly $630 million civil penalty against Habib Bank Limited and its New York Branch (“the Bank”) based on allegations of persistent Bank Secrecy Act/anti-money laundering (“AML”) and sanctions compliance failures.[1] A hearing is scheduled for September 27, 2017 before Cassandra Lentchner, DFS’s Deputy Superintendent for Compliance. The Bank – the largest bank in Pakistan – has contested DFS’s allegations and indicated that it plans to challenge the penalty and surrender its DFS banking license, thus eliminating its only U.S. branch.  DFS also issued two related orders, which (1) expanded the scope of a review of prior transactions for AML and sanctions issues, that was already underway under the terms of an earlier consent order; and (2) outlined the conditions under which the Bank could surrender its DFS banking license, including the retention of a DFS-selected consultant to ensure the orderly wind down of its New York Branch.

The severity of the language and proposed penalty in DFS’s statement of charges reflects the large number and extent of alleged compliance failures at the Bank, which DFS claims persisted for more than a decade, despite agreements with DFS and the Federal Reserve Board of Governors (“Federal Reserve”). According to DFS, these failures are “serious, persistent and apparently affect the entire [Bank] enterprise” and indicate a “dangerous absence of attention by [the Bank’s] senior management for the state of compliance at the New York Branch.”

This enforcement action illustrates that a DFS-regulated institution’s failure to show steady progress in remedying identified concerns can have significant and franchise-threatening consequences. We describe the enforcement action in more detail below, including the numerous compliance failures alleged by DFS. Continue reading