"Pacific National Bank: Financial Struggles and $7M Penalty for AML Violations"

BRIEF INTRO: Pacific National Bank, a Miami-based commercial bank and subsidiary of Banco del Pacifico S.A., was owned by the Central Bank of Ecuador with 85% of its customers from Ecuador, a FATF-flagged country for AML/CFT deficiencies, the bank was regulated by the OCC. As of December 31, 2010, it had $355 million in assets and a net income of $300,000. In 2011, FinCEN imposed a $7 million civil penalty on pacific national bank.

WHAT WENT WRONG?

1. INADEQUATE AML PROGRAM: In 2005, the OCC issued a Bank Secrecy Act Consent Order against Pacific. Despite a July 2006 warning from the Financial Crimes Enforcement Network about its anti-money laundering deficiencies, Pacific did not improve its compliance. The bank's internal controls, risk assessments, and customer due diligence were inadequate, particularly for Ecuadorian customers. Its transaction monitoring systems had high thresholds and poor testing, and the bank failed to address audit findings or properly report suspicious activities.

2. UNFILED SAR’s: Pacific violated Bank Secrecy Act requirements by filing delinquent and incomplete suspicious activity reports. From 2000 to 2005, it filed 47 reports on $136 million in suspicious activity. Under increased scrutiny, it filed 421 reports on $577 million from January 2007 to July 2010, many of which were late. Forty-eight reports were delayed by 8 to 12 months, and 43 were over 12 months late, covering transactions of over $85 million. These delays diminished the reports' value for law enforcement. Additionally, since January 2007, several reports were filed with incomplete or incorrect information.

3. CIVIL MONEY PENALTY: After considering the seriousness of the violations and the financial resources available to Pacific National Bank, the Financial Crimes Enforcement Network had determined penalty of $7,000,000 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

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