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From Banking and Finance Law Daily, February 27, 2017

FinCEN imposes $7M CMP against California bank for ‘egregious’ AML violations

By Charles A. Menke, J.D.

The Financial Crimes Enforcement Network has imposed a $7 million civil money penalty against Merchants Bank of California for what the agency characterized as "willful violations of several provisions of the Bank Secrecy Act." In addition to FinCEN’s CMP assessment, the Office of the Comptroller of the Currency, Merchants primary federal regulator, assessed a $1 million CMP against the bank for violating previous consent orders entered into between the OCC and Merchants. Under the terms of the CMP assessment, the OCC penalty will be credited towards the satisfaction of the FinCEN penalty, a release issued by FinCEN stated.

Merchants is a community bank principally located in Carson, Calif., and specializes in providing banking services for check-cashers and money transmitters. According to FinCEN, Merchants willfully violated the BSA’s program and reporting requirements from March 2012 to September 2016 by failing to:

  • establish and implement an adequate AML program;
  • conduct required due diligence on its foreign correspondent accounts; and
  • detect and report suspicious activity.

FinCEN charged Merchants with, among other things, providing high-risk customers with remote deposit capture services without maintaining adequate monitoring procedures. Merchants also banked customers located in several high-risk jurisdictions, but did not identify these customers as foreign correspondent customers and did not implement the required customer due diligence program, according to the agency. In a three-month period, Merchants processed a combined $192 million in high-risk wire transfers through some of these accounts, FinCEN said.

As a result, Merchants allowed billions of dollars in transactions to flow through the U.S. financial system without effective monitoring to detect adequately and report suspicious activity. FinCEN further stressed that many of the transactions were conducted on behalf of money services businesses that were owned or managed by bank insiders who encouraged bank personnel to process the transactions without question or face potential dismissal or retaliation.

Companies: Merchants Bank of California

MainStory: TopStory BankingOperations BankSecrecyAct CaliforniaNews EnforcementActions FinancialIntermediaries

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