A Cautionary Tale For Money Service Businesses: How Violating The Bank Secrecy Act Could Cost Millions

April 24, 2017 By Casey M. Duhart and Joshua S. Rosenblatt
Mondaq

On February 27, 2017, The Financial Crimes Enforcement Network ("FinCEN") fined Merchants Bank of California ("Merchants") $7 million for what it called "egregious" violations of the Bank Secrecy Act ("BSA").  The Office of the Comptroller of the Currency simultaneously assessed a $1 million civil monetary penalty against Merchants because it violated two previous consent orders.  Merchants is a community bank located in Carson City, California.  The Bank had a large portfolio of Money Service Businesses ("MSBs") customers.  MSBs are generally recognized by federal regulators to include: (1) currency dealers or exchangers; (2) check cashers; (3) issuers of traveler's checks, money orders, or stored value; (4) sellers or redeemers of traveler's checks, money orders, or stored value; and (5) money transmitters.  In Merchants' case, it had 165 check-cashing and 44 money-transmitter customers, who often operated at great distances from the Bank.  Compounding the situation was the fact that Bank insiders owned or managed a number of the MSB customers.

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