Big money, acquisitions and consequences

Poor AML programs? Expect federal action.

By Aaron Kahler, CFE, CAMS; Loren Grant


Entities will face fines and possible legal action if they lack adequate anti-money laundering programs. The authors describe cases in which companies ignored the warning signs and faced the consequences.

On Oct. 7, 2010, the U.S. Office of Comptroller of the Currency (OCC) issued a cease-and-desist order against HSBC Bank USA and levied potentially the largest fine in history estimated to be nearly $1 billion for violating the Bank Secrecy Act (BSA) and its underlying regulations. "The OCC found that the bank's BSA compliance program had deficiencies with respect to suspicious activity reporting, monitoring of bulk cash purchases and international funds transfers, customer due diligence concerning its foreign affiliates, and risk assessment with respect to politically-exposed persons and their associates," according to the OCC. "These findings resulted in violations by the bank of statutory and regulatory requirements to maintain an adequate BSA compliance program, file suspicious activity reports, and conduct appropriate due diligence on foreign correspondent accounts."

HSBC Bank USA failed to take action on, or knowingly ignored several key factors, related to its BSA/anti-money laundering (AML) policies and procedures as well as regulatory requirements, according to the OCC.

Big corporations are gobbling up smaller firms around the globe. This acquisition fever is leading to several U.S. regulatory agencies to clamp down on businesses who are growing a bit too fast and cutting corners. 

These agencies, which monitor the U.S. financial markets, have the authority to conduct examinations, enforce the rules of their governing bodies, levy fines and fees, and present legal charges against member firms as well as individuals. The U.S. government is increasingly investigating Bank Secrecy Act (BSA)/anti-money laundering and Office of Foreign Assets Control (OFAC) regulatory cases, and it doesn't show any signs of letting up.

We'll look at a number of instances in which agencies took regulatory action against banks, broker dealers and individuals. We'll also address the regulatory bodies' reasoning behind their actions. 


In the opening case, the OCC found that HSBC exhibited deficiencies in its compliance program in these areas: 
  • Internal controls for customer due diligence. 
  • Procedures for monitoring suspicious activity.
  • Conducting or implementing independent testing.
  • Handling of wire transfers of customers domiciled in countries rated by the OFAC as standard or medium risks, which resulted in limited and ineffective BSA/AML.
  • Monitoring of bulk cash transactions with foreign affiliates from 2006 to 2009.
  • Customer due diligence or enhanced due diligence for its foreign affiliates.


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