As U.S. regulators take aim, AML/BSA compliance programs grow in importance

An effective compliance program should be adequately documented and achieve some key goals

Since December 2012, when HSBC Holdings PLC reached a then record-setting $1.9 billion settlement, U.S. regulators have been flexing their anti-money laundering (AML) enforcement muscles. Just over a year later, JPMorgan gained the dubious distinction of breaking HSBC’s record, when it settled allegations of AML violations for more than $2 billion. On June 30, 2014, U.S. regulators struck again, when they reached an $8.9 billion settlement with BNP Paribas, France’s largest bank. As part of the settlement, BNP Paribas admitted to violating U.S. sanctions and money-laundering regulations by engaging in transactions for Sudan, Iran and Cuba. The message from U.S. regulators could not be clearer: They are committed to stronger and more aggressive enforcement of the AML laws.

The government has pursued enforcement actions against smaller financial institutions as well. In September 2013, Saddle River Valley Bank, a local New Jersey bank, was determined to have willfully violated AML laws by failing to monitor and report foreign currency exchange transactions with Mexican and Dominican institutions. The community bank ceased operations in 2012, but regulators still claimed $8.2 million in fines and civil forfeitures, which represented a majority of the bank’s remaining assets.

Rise in private litigation

Likely a result of financial institutions having to admit responsibility, the number of private lawsuits predicated on AML/BSA violations against such entities has jumped. Despite the BSA not providing for a private right of action, private plaintiffs have attempted to hold banks liable for breaching the duty of care owed to customers and have used the institutions’ admissions of guilt against them. Likewise, if a client’s fraudulent scheme benefits a bank, and the bank willfully fails to file an SAR, the bank’s actions may make it a co-conspirator and susceptible to private litigation.

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John E. Kelly

John Kelly is the founding partner of Bass, Berry & Sims’ Washington, D.C. office. John represents companies and individuals in criminal and civil litigation, government...

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Taylor J. Phillips

Taylor Phillips is an associate at Bass, Berry & Sims PLC (Washington, D.C.). Phillips represents clients in investigations by the DOJ and SEC, as well...

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Robert K. Platt

Robert Platt is an associate at Bass, Berry & Sims PLC (Washington, D.C.). Platt represents clients in government and internal investigations. He may be reached...

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