Written by Shari R. Pogach, Regulatory Paralegal, NCBSO
Looking to buy a car? Have I got a great deal for you! On March 1st, the Department of Justice (DoJ) announced the indictment of 19 individuals as a result of an international investigation into a transnational organized crime network. Members of the crime network were charged with international fraud and money laundering conspiracies resulting in more than $13 million in losses from over 170 victims, primarily here in the United States.
Amongst others, one of the alleged schemes involved online vehicle fraud. Operating out of Europe, a criminal participant would advertise a car he did not own on the Internet. Such cars were marketed on popular websites aimed at attracting buyers in the U.S. and offered at prices lower than those offered by legitimate sellers. Then prospective buyers were instructed to deposit money by wire transfer into fraudulent bank accounts. The monies were immediately withdrawn with the buyer never receiving the car. According to the indictment at least 170 victims were induced to collectively transfer $4 million controlled by participants in the scheme.
Suspicious activity? What suspicious activity? The Financial Crimes Enforcement Network (FinCEN) announced a $7 million civil money penalty against Merchants Bank of California (Merchants) of Carson, CA. In a nutshell, Merchants failed to fulfill and follow the Bank Secrecy Act (BSA) and anti-money laundering (AML) reporting and recordkeeping requirements.
According to FinCEN, the bank allowed billions of dollars in transactions, many of which were conducted on behalf of money services businesses (MSBs) owned or managed by bank insiders. The bank specialized in providing services for check-cashers and money transmitters but did so without adequately assessing the money laundering risks or having an effective AML program. Nor did it conduct the required due diligence on its large portfolio of MSB customers in high-risk jurisdictions. Staff personnel were encouraged to process the transactions without question or face potential dismissal or retaliation. Bank insiders and leadership staff interfered directly with the BSA staff's attempts to investigate any suspicious activity concerning insider-owned accounts. Inadequate monitoring of billions of dollars of transactions for suspicious activity meant the bank didn't timely file or even file suspicious activity reports (SARs) on hundreds of millions of dollars of transactions. In a three-month period, it was found that Merchants processed a combined $192 million in high-risk wire transfers.
FinCEN seeks input on SAR form updates. FinCEN is updating and revising some of the fields in the SAR. Specific changes involve the removal of some current fields and the addition of a category section for "Cyber-event." FinCEN states the data fields reflect the filing requirement for all filers of SARs under the Bank Secrecy Act. Comments on the changes are due to FinCEN on or before April 3, 2017.