In their recent article in BNA’s Banking Report, Thomas P. Vartanian and Dominic A. Labitzky continued their survey of bank enforcement actions for the first half of 2007. See Vartanian and Labitzky, 2007 Bank Enforcement Trends: Foreign-Owned Banks in the Spotlight, Banking Report (BNA) (Sept. 24, 2007). This is the second installment in a semi-annual series on bank regulatory enforcement actions scheduled for publication in the BNA Banking Report (for the series’ first installment see Vartanian and Labitzky, 2006 Bank Enforcement Trends: Focus on Compliance Program Efficacy, Banking Report (BNA) (June 4, 2007). The enforcement action surveys are intended to give financial institutions some perspective on the concerns and focus of the regulators by documenting recent enforcement trends.
Bank enforcement actions during the first half of 2007 fell into categories similar to those of past years with a clear focus on Bank Secrecy Act (“BSA”) and Anti-Money Laundering (“AML”) issues. The bank regulators’ persistent BSA/AML focus demonstrates the continued determination of the regulators to ensure compliance with BSA/AML laws and regulations and underscores the continued challenges faced by institutions to comply adequately. While the particular type of enforcement action for BSA/AML noncompliance varied, the differences reflect more the mix of cases rather than any regulatory trend, as the cases in the second half of the year already suggest. If any trend has developed in the BSA/AML area, it is illustrated by the number of foreign-owned banks that are the focus of enforcement actions, some of which are discussed in the BNA article.
In addition, the article discusses criminal and other government enforcement actions, insider transactions, and lending noncompliance, and includes a discussion of the bank regulatory agencies’ statement on subprime mortgage lending. The article concludes that further turmoil in the mortgage market will most likely lead bank regulatory agencies to increase the pressure on the lending standards and consumer protection provisions outlined in the agencies’ joint statement on subprime lending.
With the regulator’s continued focus on BSA/AML compliance and an expected avalanche of litigation as a result of subprime foreclosures and mortgage securities meltdowns, financial institutions should take the time to ensure compliance in all these critical areas.