Bank Fined Millions for AML Compliance Failures

March 17, 2016

A Miami-based bank is being fined $6.5 million for anti-money laundering (AML) compliance lapses, including failing to report suspicious transactions. The incidents involve Gibraltar Private Bank and Trust Company and former lawyer Scott Rothstein, who ran a Ponzi scheme that cost investors $1.2 billion.

According to U.S. regulators, the private bank “willfully” violated the Bank Secrecy Act (BSA) by not addressing deficiencies in its regulatory compliance and for failing to report 120 suspicious activity reports (SARs) totalling nearly $558 million between 2009 and 2013.

According to the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN), “Gibraltar’s transaction monitoring system contained incomplete and inaccurate account opening information and customer risk profiles”, which prevented compliance staff from adequately detecting unusual account activity.

The bank and trust company also “failed to sufficiently address an automated monitoring system that generated an unmanageable number of alerts, including large numbers of false positives, which caused significant delays in Gibraltar’s review.” There were further allegations that the bank failed to properly train its compliance staff and develop and implement an adequate customer identification program.

Gibraltar Private Bank and Trust Company is not the only institution being fined in relation to the Rothstein case. Canada’s Toronto-Dominion Bank was also fined $37.5 million by FinCEN for not reporting suspicious transactions in accounts belonging to the former lawyer. Rothstein was convicted in 2010 and is serving a 50-year sentence in U.S. federal prison.

In 2015 FinCEN fined a number of institutions for failure to comply with the BSA. For example:

  • In December, B.A.K. Precious Metals, Inc., its sole owner and compliance officer were fined $200,000. The company reportedly did not require any documentation or identification prior to conducting business with new, high-volume customers whose transactions ranged from $14 million to $23 million. In addition, many of the company’s purchase orders, several of which were more than $100,000, contained only the business name and no identifying information on the individuals. The company’s practices were deemed to create great risks for criminal abuse.
  • In September, Caesar’s Palace Casino was charged $8 million for allowing a blind spot to its AML compliance program that enabled Caesar’s wealthiest clientele—who may gamble millions of dollars in a single visit—to gamble anonymously in "private gaming salons".
  • In June, a Los Angeles-based money services business (MSB), its owner and compliance officer were charged $60,000. The company is said to have “failed to file at least 216 currency transaction reports in a timely manner during the six-month exam scope period, and hundreds more after the examination had concluded and the business was advised of its failings.”

About Andrew Simpson

Andrew Simpson (LinkedIn | Twitter) is Chief Operating Officer at CaseWare RCM and has more than 20 years of experience building businesses in the fields of information systems audit and security, data analytics, Anti-Money Laundering and forensics. He is a regular contributor to conferences and a recognized thought leader in financial crime management.

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