The anti-laundering penalty box
January 13, 2017 3:50 PM
The anti-laundering penalty box
Violations of Bank Secrecy Act and anti-money-laundering compliance remains a hot topic for financial institutions as regulators can bar them from branch building and bank acquisitions. Here are some notable regulatory actions that are still unresolved.
M&T Bank
The Buffalo, N.Y., company is nearing the fourth anniversary of a written agreement with the Fed that delayed its acquisition of Hudson City Bancorp. M&T finally obtained regulatory approval for that deal in September 2015, closing the transaction soon thereafter. M&T is still restricted from most forms of expansion, though it can open branches in historically underserved communities. M&T must show the Fed that the Hudson City integration "has been satisfactorily completed and examiners have confirmed that all risk management and compliance systems … are fully implemented, functioning effectively, adequate for proactively identifying and promptly addressing all risks."
Fulton Financial
The Lancaster, Pa., company disclosed in July 2014 that three of its banks were hit with consent orders; three more banks eventually ended up with orders . Fulton had been working on its BSA-AML compliance program since 2012. Staffing in that area of expertise quadrupled since 2011 to more than 55 people. Fulton, which has spent roughly $24 million on consultants and temporary help, reported a nearly $4 million increase in annual hiring-related expenses. Fulton has been unable to consolidate its six bank charters as it tackles the order.
U.S. Bancorp
The Office of Comptroller of the Currency hit U.S. Bancorp in late 2015 with a consent order tied to deficiencies in its anti-money-laundering compliance program. The Minneapolis company said then that it had already implemented some of the enhancements and other actions required by the order. Costs associated with compliance activities contributed to a 6.2% year-over-year uptick in noninterest expense for the third quarter of 2015. While U.S. Bancorp is barred from buying banks, it is allowed to acquire fee businesses.
East West Bancorp
The November 2015 order required East West to submit a revised compliance program and hire an outside firm to review higher-risk clients and transactions. The Fed also identified deficiencies with the Treasury Department's Office of Foreign Assets Control compliance program. The issues, found during a regulatory exam, were tied to East West's deposit accounts. East West had been working on the issues before the agreement was signed; those efforts contributed to a $2.8 million rise in consulting expenses in 2015's third quarter. Analysts had projected that East West would need to spend an additional $10 million to fully comply.
Investors Bancorp
The Short Hills, N.J., company agreed last year to develop, adopt and implement internal controls to ensure BSA compliance . It also has to conduct a comprehensive validation of its automated compliance system and develop, adopt and implement effective training programs. Investors also formed a compliance committee within its board. It had already enhanced its risk management and compliance programs by restructuring reporting lines, improving technology and increasing staff, adding a chief risk officer and head of BSA/AML and fraud/loss prevention.
The order stands in the way of Investors completing its planned purchase of Bank of Princeton, which remains under review by the Federal Deposit Insurance Corp.
The order stands in the way of Investors completing its planned purchase of Bank of Princeton, which remains under review by the Federal Deposit Insurance Corp.
The CU Bancorp
The Los Angeles company, under the terms of a September order , must produce a written plan detailing efforts to correct compliance weaknesses, including a review of staffing needs and plans to enhance internal controls and create a testing program. The company expects annual expenses to rise by $1.1 million due to increased staffing.
Management also expects $2 million in one-time costs in the third and fourth quarters tied to using consultants to review internal improvements.
Management also expects $2 million in one-time costs in the third and fourth quarters tied to using consultants to review internal improvements.
Ameris Bancorp
Ameris said last month that its problems are tied to automated software that a third-party put in place to aid the Moultrie, Ga., company's expansion. Ameris learned in August that several coding parameters were not set properly, producing "erroneous results," according to a note from Keefe, Bruyette & Woods. Since then, Ameris has hired an experienced BSA officer and consultants were brought in to speed up improvements. Ameris still secured regulators' support for a joint venture with an insurance-premium-finance company that it wants to buy.
BB&T
BB&T's consent order from the FDIC and the North Carolina commissioner of banks, revealed a few weeks ago, calls for "corrective actions and enhancements to address certain internal control deficiencies" with BSA and anti-money-laundering compliance. No criminal activity was identified and no financial penalty was levied, but BB&T said it expects to enter into a similar order with the Fed in the near future. BB&T said it had already taken steps to improve compliance, investing in processes and system upgrades and hiring "a highly experienced" professional to oversee those efforts. While the order prevents BB&T from buying banks, the Winston-Salem, N.C., company had already been operating under a self-imposed deal moratorium as it digested prior acquisitions.
