CARSON, Calif.—The U.S. Treasury has penalized Merchants Bank of California $7 million for anti-money laundering violations—an amount that represents nearly 11% of the bank’s assets.
The Treasury called the violations “egregious and willful,” stating they were chiefly tied to the bank’s monitoring, oversight and reporting of activity on its stable of remitter clients and correspondent portals, noted a report from the Associated Certified Financial Crime Specialists (ACFCS),
“The Financial Crimes Enforcement Network (FinCEN) issued the penalty against the small and struggling bank in an action that details what can happen in a compliance worst case scenario where profit-driven insiders secretly control risky businesses, push their agenda through threatening bank staffers and use their knowledge of anti-money laundering (AML) processes to evade controls.” ACFCS stated.
The Merchants Bank of California scenarios is similar to that reported by CUToday.info at the former $4-million North Dade Community Development Credit Union in Miami Gardens, Fla.—which was eventually shut down by NCUA after being hit with AML fines from FinCEN stemming from the CU’s relationships with money services businesses (MSBs). The credit union had been operating in the red before getting into business with the MSBs.
“The bank has been losing millions of dollars annually – by delving into an area with many layers of high-risk strata, including money services businesses near the Mexican border, offering remote deposit capture check-cashing services and later, these operations exhibiting transactional tells indicative of structuring, layering and commingling,” ACFCS said.
The penalty for the small bank is among the largest FinCEN has ever handed out related to Bank Secrecy Act (BSA) issues compared to the bank’s overall holdings – the $7 million is nearly 11% of the bank’s total assets, evincing the seriousness of failings that dated back to 2010 and spread across several prior enforcement actions, ACFCS said.