"Major Bank Fined $2 Million for Facilitating Hundreds of Millions in Suspicious Transactions"

BRIEF INTRO: Lone Star, a bank with over $2.2 billion in assets and 28 branches as of June 30, 2017, violated the Bank Secrecy Act. This allowed a foreign financial institution to move hundreds of millions of U.S. dollars in the U.S. financial system under two years.

WHAT WENT WRONG?

1. INADEQUATE AML PROGRAM: Lone Star failed to establish an adequate anti-money laundering (AML) program. An October 2014 audit found 37 out of 50 accounts had missing or incorrect information, hindering the bank's ability to detect suspicious activities and review AML alerts effectively.

2. LACK OF CUSTOMER DUE DILIGENCE: From May 2010 to November 2011, Lone Star provided bulk cash deposit and correspondent banking services to a large Mexican financial institution, allowing $260 million to flow through the account without sufficient controls to detect or report suspicious activity.

3. NEGLECTING FOREIGN BANK RED FLAGS: Despite the Foreign Bank’s deposits being two to three times higher than stated and frequent suspicious wire transfer requests, Lone Star took no action. Over 18 months, the Foreign Bank made 63 bulk cash deposits totaling about $260 million and 73 outgoing wire transfers. Lone Star closed the account in 2011 after the OCC raised concerns.

4. UNFILED SAR’s: Lone Star failed to monitor and report suspicious activity as required by the (BSA), resulting in 173 missed (SARs). From2010 to 2014, the bank inadequately monitored transactions and initially missed five SARs identified in 2011. After an OCC directive, Lone Star filed seven SARs for foreign correspondent accounts and bulk cash shippers. A later review from June 2011 to May 2013 added 161 SARs, including 69 for cash structuring, covering about $131 million in unreported suspicious activity.

CIVIL MONEY PENALTY:

Lone Star admitted to willfully violating the BSA's program and reporting requirements, leading FinCEN to impose a $2 million penalty on the bank.

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

FPM AML-CHECK® offered an advanced screening solution to help financial institutions in Pakistan combat financial crimes, with a comprehensive database of domestic Politically Exposed Persons (PEPs). Recognized for excellence and endorsed by the NBFI and Modaraba Association of Pakistan, our award-winning AML solution ensured robust compliance.

For more information, contact us at:

WhatsApp: 0301-1157150 / 51

Email: haris@fpmamlcheck.com