"Kingdom Trust Hit with $1.5M Penalty for Bank Secrecy Act Violations"

BREIF INTRO: Kingdom Trust, headquartered in Sioux Falls, South Dakota, with most of its 80 employees in Murray, Kentucky, offered custody services for self-directed IRAs and served as a qualified custodian for investment advisers. It also provided account and payment services to high-risk businesses in Latin America. Following an investigation, FinCEN imposed a $1,500,000 Civil Money Penalty on Kingdom Trust for violations of the Bank Secrecy Act, which the company admitted to in a Consent Order.

WHAT WENT WRONG?

1. UNFILED SAR’s: Kingdom Trust's process for identifying and reporting suspicious activity was severely inadequate during the relevant period, leading to a willful failure to file timely and accurate Suspicious Activity Reports (SARs). The company's AML staff lacked experience, the transaction review process was insufficient, and reliance on employees to detect suspicious activity was unrealistic due to high transaction volumes. Although an automated monitoring system was introduced in 2017, it wasn't operational until 2021. FinCEN identified hundreds of missed SAR filings, primarily involving three customers. For Customer B, nearly 200 suspicious transactions totaling $16 million were processed in 2017 and early 2018 without proper scrutiny. For Customer C, over 400 suspicious transactions totaling $63 million occurred in late 2016 and 2017, involving wire transfers to Miami-based businesses later implicated in a 2018 drug money laundering indictment.

2. CIVIL MONEY PENALTY: After considering all the facts, circumstances, enforcement factors, and Kingdom Trust's resources, FinCEN decided to impose a Civil Money Penalty of $1,500,000 in this matter.

LESSONS LEARNED:

Key learnings for other financial institutions:

1. Compliance Was Non-Negotiable

2. Timely Reporting Was Essential

3. Customer Due Diligence Could Not Be Overlooked

4. Effective Use of Technology

5. Regular Audits and Reviews Were Necessary

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