ARLINGTON, Va.—The pace at which FinCEN proposes or issues new rules is expected to quicken, following a recent consent order against Shinihan Bank America (Shinihan Bank) for willfully violating the Bank Secrecy Act (BSA), NAFCU is predicting.
“Consent orders are nothing new but do provide an opportunity to see what types of behavior get the regulators’ attention,” stated NAFCU Senior Regulatory Compliance Counsel Justin White, who said the action is one that credit unions and all Fis should be giving attention.
It is not the first time Shinihan Bank has been fined by regulators for lax BSA compliance. Shinihan Bank entered a consent order in 2017 with the Federal Deposit Insurance Corporation (FDIC) and a memorandum of understanding in 2020 with New York State’s Department of Financial Services (NYDFS). It was found that Shinihan Bank was out of compliance with both the 2017 consent order and the 2020 memorandum, White said.
The Minimum
FinCEN found Shinihan Bank had an inadequate anti-money laundering program. Generally, an anti-money laundering program must include, at a minimum:
- The development of internal policies, procedures, and controls
- An independent audit function to test programs
- Designation of a compliance officer
- An ongoing employee training program
- Appropriate risk-based procedures for conducting ongoing customer due diligence (CDD)
‘Failed in Several Categories’
“However, the consent order states that Shinihan Bank failed to implement these minimum requirements. Overall, the consent order describes that Shinihan Bank failed in several categories that are important to maintain an effective BSA compliance program. FinCEN found that Shinihan Bank’s customer due diligence was lacking. Shinihan Bank failed to conduct CDD and assign a customer risk rating score to those customers. Moreover, Shinihan Bank failed to monitor customer transactions to measure overall risk,” White said.
Shinihan Bank failed to establish adequate transaction monitoring baselines, White said.
“This impaired the bank’s ability ‘to determine whether the actual account activity was unusual for the customer or not.’ In addition, the risk rating applied to its customers was not comprehensive or risk-based. According to FinCEN, this led to the bank failing to capture and document ‘cash-intensive individuals with a high volume of domestic and international wire activity’ in its CDD,’” White explained.
White added that FinCEN also alleges Shinihan Bank’s transaction monitoring was ineffective.
Additional Issues
The consent order found several other issues, White said, including:
- No formalized procedures for filing suspicious activity reports leading
- Delays in filings and the BSA compliance team from the line level all the way up to the management
- Corporate governance issues with its own board of directors failing to properly supervise the remediation of the bank’s anti-money laundering program, which was required under the 2017 FDIC consent order.
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