Banamex USA to Pay $97 Million Penalty and Cease Banking Operations 

to Resolve Bank Secrecy Act (BSA) Violations

 

■ ■ ■  June 2, 2017

 

 

Last week, the U.S. Department of Justice (DOJ) announced that Banamex USA (BUSA), a subsidiary of Citigroup Inc., agreed to forfeit $97.4 million and entered into a Non-Prosecution Agreement (NPA) in connection with BUSA's Bank Secrecy Act (BSA) violations.

 

As part of the NPA, BUSA admitted to criminal violations by willfully failing to maintain an effective Anti-Money Laundering (AML) Compliance Program. The DOJ took into account BUSA's remedial actions which included devoting significant resources to remediation of the BSA and AML deficiencies, exiting BUSA's money services business (MSB) entirely, and ultimately ceasing all banking operations at BUSA effective June 30, 2017.

 

BUSA admitted that from 2007 until at least 2012, they processed more than 30 million remittance transactions to Mexico and during the same period BUSA's monitoring system flagged more than 18,000 alerts involving more than $142 million of potentially suspicious remittances. However, BUSA only conducted ten investigations and filed just nine Suspicious Activity Reports (SARs) in connection with these 18,000 alerts. For several years, BUSA employees considered these transactions to Mexico suspicious. However, the bank failed to improve its monitoring system and did not properly safeguard its system from processing drug money and other illicit funds. Among the flagged transactions that BUSA did not investigate were $1.3 billion in remittances each totaling more than $1,500 which is five times the amount that families typically send. Another suspicious account holder in Mexico received 1,400 remittances from 950 senders in 40 states while the norm is for families to receive remittances from one or two sources.

 

In a related matter in July 2015, the Federal Deposit Insurance Corporation (FDIC) and California Department of Business Oversight ordered BUSA to pay $140 million civil penalty to settle their BSA investigation. The FDIC also fined various senior BUSA executives, including its Chief Compliance Officer (CCO), and barred them from working at financial institutions.

 

With the increased regulatory enforcement environment, record-setting BSA fines being levied, and personal liability imposed on executive officers, it is more critical than ever for financial institutions, MSBs and companies to assess and strengthen their AML Compliance Programs. MDO Partners encourages companies to update their AML policies and procedures, enhance their AML internal controls, including High Risk Reviews, Transaction Look Backs, Account Monitoring, and Beneficial Ownership Due Diligence, and assess the effectiveness of their internal investigations for BSA violations. Our team has extensive experience advising clients on BSA and effective AML Compliance Programs.

 

About MDO Partners

 

MDO Partners is a boutique law firm that focuses on Corporate, International, and Real Estate Law, as well as Global Compliance and Business Ethics. The firm is comprised of a solid team of attorneys and advisors with more than 100 years of combined experience who are committed to the business goals and best interests of their clients. The firm delivers value-added services of the highest caliber, and serves as a trusted advisor to its clients with a practical and business-savvy approach. For more information on MDO Partners, please visit www.mdopartners.com

 

If you have questions or comments regarding this Alert, please contact the attorney or advisor listed below.

 

Richard Montes de Oca

Managing Partner

305.704.8452

rmontes@mdopartners.com

 

Javier Jaramillio

Compliance Advisor

786.295.6644

jjaramillo@mdopartners.com