Yesterday, the U.S. Department of Justice (DOJ), Federal Deposit Insurance Corporation (FDIC) and Financial Crimes Enforcement Network (FinCEN) took coordinated action against the Bank of Mingo (Bank), Williamson, West Virginia, for Bank Secrecy Act/anti-money laundering (BSA/AML) program failures. The action follows on the heels of recent enforcement actions against other financial institutions for BSA/AML program weaknesses by the Board of Governors of the Federal Reserve System and FinCEN.
The DOJ charged the Bank in a one-count criminal information with failure to maintain an effective BSA/AML program during a three-year period. As a result, the DOJ alleged, the Bank failed to obtain sufficient know-your-customer information, prevent customers from structuring cash transactions to avoid currency transaction reporting (CTR) requirements, and file suspicious activity reports. The DOJ agreed to forego prosecution for a 12-month period, taking into consideration the Bank’s acceptance and acknowledgment of responsibility, remedial actions, cooperation, and willingness to settle, and the Bank agreed to forfeit $2.2 million.
The DOJ’s allegations center on the conduct of one individual, identified in the settlement documents only as the “Williamson Branch Manager,” who facilitated structuring by principals of Aracoma Contracting, LLC (Aracoma), a contract labor provider to coal mining operations. Aracoma separately pled guilty in November 2013 to one count of conspiracy to structure currency transactions. According to the plea documents, Aracoma would pay its employees wages in cash, through cash withdrawals from the Bank in increments of less than $10,000, in order to avoid the Bank’s CTR filing requirement and, ultimately, to avoid paying employment taxes. The branch manager pled guilty in May 2014 to making a false statement to Federal agents regarding suspicious banking activity conducted by Aracoma and was sentenced to three years’ probation and a $5,000 fine. Separately, in December 2014, the FDIC prohibited the branch manager from banking.
The Bank has been subject to a Consent Order with the FDIC and the West Virginia Division of Financial Institutions to address BSA/AML- and management-related concerns since November 2013. In its action against the Bank yesterday, the FDIC assessed a $3.5 million penalty concurrent with, and partially offset by, the $2.2 million forfeiture. FinCEN assessed a $4.5 million penalty, concurrent with the FDIC’s $3.5 million penalty, including the offset. Accordingly, the Bank paid a total of $4.5 million in penalties and forfeiture. Although this figure does not approach the figures recently assessed in a number of high-profile BSA/AML and sanctions matters, it is significant in light of the Bank’s $96 million asset size and constitutes nearly 5 percent of the Bank’s total assets.