Last Tuesday, a raft of US regulators (Treasiry, FDIC, OCC, NCUA and the Board of Governors of the Federal Reserve) issued a 4-page “Joint Fact Sheet on Foreign Correspondent Banking: Approach to BSA/AML and OFAC Sanctions Supervision and Enforcement“. Some highlights:
Under existing U.S. regulations, there is no general requirement for U.S. depository institutions to conduct due diligence on an FFI’s customers.
In cases where prompt remedial action is not taken by management, the corrective action is not effectively implemented or the deficiencies are more serious, the FBAs can consider a range of steps to ensure that actions are implemented or deficiencies are successfully addressed. These options can vary in levels of severity, allowing the agencies to consider their supervisory responses relative to the seriousness of the identified deficiencies in the particular depository institution. This range of options allows the FBAs flexibility in targeting their supervisory responses to remediate any deficiencies identified. The vast majority of BSA/AML compliance deficiencies identified by the FBAs—approximately 95%—are resolved through the supervisory process without the need for an enforcement action.
OFAC investigates cases of sanctions violations, many of which (over 95 percent) are closed with administrative measures, such as cautionary or no action letters. This means that less than five percent of all cases of sanctions-related violations investigated by OFAC have resulted in a civil monetary penalty or other public enforcement response.
It is important to note that the largest and most prominent monetary penalties for BSA/AML and sanctions violations in recent years generally involved a sustained pattern of serious violations on the part of depository institutions. With regard to the sanctions violations, these cases did not involve unintentional mistakes, but generally involved intentional evasion of U.S. sanctions over a period of years and/or the failure of the institutions’ officers and/or senior management to respond to warning signs that their actions were illegal. Many of these major cases also involved criminal conduct that was prosecuted separately by the Department of Justice.
FBA = Federal Banking Agencies