The Financial Crimes Enforcement Network (FinCEN) has fined Michael LaFontaine, former chief operational risk officer at U.S. Bank, a subsidiary of U.S. Bancorp, with a $450,000 civil penalty for his negligence in failing to intercept breaches of the Bank Secrecy Act (BSA), FinCEN announced on Wednesday (March 4).
The automated transaction monitoring software U.S. Bank had in place erroneously capped the number of alerts, which hindered law enforcement’s ability to spot suspicious activity. The bank also inadequately staffed the BSA compliance function.
“Mr. LaFontaine was warned by his subordinates and by regulators that capping the number of alerts was dangerous and ill-advised. His actions prevented the proper filing of many, many SARs, which hindered law enforcement’s ability to fully combat crimes and protect people,” said FinCEN Director Kenneth A. Blanco. “FinCEN encourages technological innovations to help fight money laundering, but technology must be used properly.”
In February 2018, FinCEN collaborated with the Office of the Comptroller of the Currency (OCC) and the U.S. Department of Justice (DOJ) to penalize U.S. Bank $185 million for numerous offenses, including “willfully violating” BSA mandates for having an anti-money laundering (AML) procedure. The bank had also neglected to submit suspicious activity reports (SARs) on time.
Two subordinates alerted LaFontaine that they thought the system was insufficient due to the alert limits. The OCC also warned U.S. Bank that capping the system due to staff size and available resources could trigger enforcement.
Staff had also sent memos to LaFontaine alerting him that the AML staff was “stretched dangerously thin” because of increased SAR volumes and law enforcement inquiries. LaFontaine “failed to take sufficient action” to remedy the issues. The capped alerts were in place for at least five years.
The European Union’s Fifth Anti-Money Laundering Directive (5AMLD) went into effect on Jan. 10, with new regulations for cryptocurrencies, wallets and exchanges. Some operators responded by moving to countries with more relaxed rules, or simply shuttering. The EU is already prepping 6AMLD, which cracks down even harder on money laundering, especially online gambling.