Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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1/3/2006 Miami Bank Fined For Lack of Vigilance Regarding MSBs, Foreign Correspondent Banks

The Beach Bank of Miami Beach agreed to an assessment of $800,000 in an action brought by FinCEN, the FDIC, and the Florida Office of Financial Regulation. The action concluded that the Bank had failed to implement adequate controls over accounts of “financial institution type customers,” which included about 40 money services businesses and six foreign correspondent banks, despite internal identification of at least some of these customers as high-risk. Three of the MSBs collectively withdrew more than $615 million in currency over an 18-month period, but the Bank did not investigate the activity to determine if it was suspicious. The Bank also failed to review available audits of MSB customers. One telecom company conducted approximately $100 million in wire transfer activity in two months for phone card sales and telecommunication services. However, the file documentation did not reflect the source of funds or support the level of activity in the account. In addition, the Bank Secrecy Act Officer was unaware of the account activity and acknowledged that the account was not monitored despite the Bank's stated policy of 100% monitoring of high-risk accounts. Phone cards have been implicated in money laundering typologies. The penalty is relatively small, and confirms that regulatory agencies are no longer focusing exclusively on big fish for BSA violations. Perhaps there was also a desire on FinCEN’s part not to come down too heavy on a bank servicing MSBs, given the well-publicized difficulties that MSBs are having in obtaining banking services.

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