California Bank Fined $31 Million for Skimping on Anti-Money Laundering Campaign

Union Bank of California, N.A., which is a wholly-owned subsidiary of UnionBanCal Corporation and based in San Francisco, has agreed to enter into a deferred prosecution agreement relating to charges of failing to maintain an effective anti-money laundering program. They will have to forfeit $21.6 million to the federal government.

If the bank fully implements proper anti-money laundering measures as required in their agreement, the charges will be dropped in 12 months.

There are going to be additional penalties assessed against the bank by The Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of the Currency (OCC). Each of these has assessed an additional $10 million civil money penalty, but the FinCEN penalty will be satisfied by the $10 million payment to the OCC, making the total payment $31.6 million.

The charges came about because of transactions conducted between May 2003 and April 2004 involving accounts at the bank that were in the name of Mexican currency exchange houses. Undercover operations by the U.S. and other governments document the export of multi ton shipments of
cocaine from Colombia to Mexico, with the final destination of the drugs the U.S. and Europe. Investigators then were able to trace the flow of the money from the drugs in the form of bulk shipments of both U.S. dollars and euros to a few of the Mexican currency exchanges, who were working together, or were direct deposited to accounts held by the exchanges in Spain. In both cases, the money was eventually wire transferred or were first converted into other negotiable instruments and ended up in the accounts in California. The bank failed to detect, identify and report the transactions as is required by the Bank Secrecy Act.

The Bank Security Act requires the banks to establish and maintain a program that must at least provide for internal policies, procedures, and controls that are specifically designed to guard against money laundering, the bank must coordinate and monitor the day-to-day compliance with the Bank Secrecy Act, maintain an ongoing employee training program; and implement independent testing for compliance conducted by bank personnel or an outside party. Their program must also be able to identify and report suspicious financial transactions to the U.S. Treasury Department's Financial Crimes Enforcement Network.

The case was prosecuted by Senior Trial Attorney John W. Sellers and Acting Assistant Chief Mia Levine of the Criminal Division's Asset Forfeiture and Money Laundering Section, which is headed by Chief Richard Weber.

This case was jointly investigated by the Drug Enforcement Administration's San Diego and Miami Field Divisions, the DEA Bogota Country Office, the DEA Madrid Country Office, Internal Revenue Service - Criminal Investigation, San Diego Branch of the Los Angeles Field Office, and the Sunny Isles Beach Police Department and the Homestead Police Department in Florida.

Source: Department of Justice http://www.usdoj.gov/