WASHINGTON — Last week the Federal Reserve Board and Treasury's Financial Crimes Enforcement Network announced a $65 million assessment against American Express Bank International and American Express Travel Related Services Company, Inc. for Bank Secrecy Act violations.
The Fed and FinCEN assessed $20 million in civil penalties against AEBI plus another $5 million for its travel company. The orders were coordinated with the Department of Justice, which is announcing a deferred prosecution agreement with AEBI in connection with charges that the company failed to maintain an anti-money laundering program. AEBI will forfeit $55 million to the United States to settle the Department's forfeiture claims.
The penalties to be paid by the American Express entities were worked out to $65 million. FinCEN's total penalties of $25 million will be satisfied by a single $10 million payment to the Treasury Department, and the remaining $15 million satisfied by a portion of the $55 million forfeiture to the Department of Justice. The Federal Reserve Board's $20 million penalty will be deemed satisfied by the payments made by AEBI to the U.S. Department of Justice and FinCEN.
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AEBI and its Travel Related Services, without admitting or denying fault, agreed to the penalties and a Cease and Desist order was issued by the Fed against AEBI to take corrective actions. The Fed alleged that AEBI failed to establish and maintain an adequate anti-money laundering program. AEBI is an Edge Act corporation that offers traditional private banking services. The agency determined that AEBI had significant breakdowns in carrying out its BSA compliance activities and, as a result, failed to have adequate procedures in place to ensure and monitor AEBI's compliance with the BSA and related laws and regulations.
"Today's action by the Federal Reserve underscores the necessity for banking institutions to have anti-money laundering controls in place that are commensurate with the level of risk associated with their operations," Fed Director of Banking Supervision and Regulation Roger T. Cole said. "Every banking organization should ensure that its risk-management practices are effective in mitigating the risks associated with its particular operations."
FinCEN determined that AEBI repeatedly failed, over the course of several years, to adequately respond to certain supervisory findings with respect to the effectiveness of account monitoring controls to ensure compliance with the BSA. AEBI failed to implement adequate internal controls, failed to conduct adequate independent testing, and failed to designate compliance personnel to ensure compliance with the BSA, according to FinCEN. AEBI operated in certain high-risk jurisdictions and business lines without commensurate systems and controls to detect and report money laundering and other suspicious activity in a timely manner, as well as manage the risks of money laundering, including the potential for illicit drug trafficking-based Black Market Peso Exchange transactions.
FinCEN also found that the money services business, a wholly-owned subsidiary of American Express Company, failed to file a significant number of suspicious activity reports.
"These joint and concurrent actions serve as another example of collaboration by federal agencies to apply a consistent approach to Bank Secrecy Act enforcement," FinCEN Director James H. Freis Jr., said. "Enforcement actions, especially major enforcement actions, are rare and only applied when appropriate. It is a well-considered public policy choice to place BSA responsibilities on our financial institutions which serve as gatekeepers to the financial system. The information lost when a company fails in its obligations puts other companies, and the broader financial system, at risk."
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