$15 Million Assessed for BSA/AML Program Deficiencies

By Serena Lynn, Editor, CCH Federal Banking Law Reporter.

Sigue Corporation and Sigue, LLC, a money services business (MSB) headquartered in San Fernando, Calif., have been charged with violations of the Bank Secrecy Act and with failing to maintain an effective anti-money laundering program. Based on a deferred prosecution agreement with the Department of Justice, Sigue will forfeit $15 million to the U.S. government. The Financial Crimes Enforcement Network also has assessed a civil money penalty in the amount of $12 million against Sigue, which will be deemed satisfied by a portion of the $15 million payment to the Justice Department.

FinCEN determined that Sigue failed to establish and implement an anti-money laundering program reasonably designed to ensure compliance with the Bank Secrecy Act which led, in turn, to a failure by management at Sigue to implement measures to respond to continued patterns of suspicious activity, with repeated common characteristics, at certain agent locations. Specifically, FinCEN reports that on multiple occasions over an extended period of time, 47 agents assisted customers in the structuring of transactions represented to be drug trafficking proceeds to avoid the BSA currency transaction reporting requirements. FinCEN found that Sigue's failure to implement effective internal controls, training and independent testing to manage the risk of money laundering was serious, longstanding and systemic.

Obligation to Prevent Illegal Activity

According to Carol Van Cleef, Partner, Bryan Cave LLP, Washington D.C., a major point underscored by this case "is that it is not enough just to detect and report suspicious activity. Instead, there is an affirmative obligation to prevent money laundering or terrorist financing activity from occurring," a requirement based on the criminal statutes at 18 USC 1956 and 1957.

This point is emphasized as well by FinCEN Director James H. Freis Jr., who stated that financial institutions must "exercise effective oversight and control over the authorization, transactional activity and operations of their agents to ensure compliance with the BSA and prevent money laundering. Operations with sound programs minimize the risk of being misused by criminals and unscrupulous or non-compliant agents."

Blocking Suspicious Accounts

Considering that the agreement requires Sigue to develop and implement procedures to determine when it should block further transactions after having filed two or more SARs during a 12-month period, Van Cleef pointed out that the federal criminal statutes effectively put financial institutions in a position that they need to proactively investigate suspicious activities and take appropriate steps once they determine the activity may involve money laundering. She stressed that financial institutions should take note of this case and ensure that systems are in place to address repeat offenders. "If you identify an activity as suspicious for potential money laundering then you put yourself on notice that there is a reasonable chance the customer is doing something that they should not be. You should strongly consider closing the account under such circumstances—because if you don't, you leave yourself open to being seen as aiding or abetting or being willfully blind to the activity," Van Cleef stated. "Once you cross the line of determining that the activity is suspicious enough to warrant filing a SAR, and yet you continue to provide services, you can put yourself in a very precarious position," she added.

Van Cleef encourages all financial institutions, especially MSBs and banks working with MSBs, to pay attention to this order. Training and monitoring, as well as agent termination procedures, are important to protect the institution.