Federal Authorities Announce Major BSA/AML Action Related To Madoff Scheme

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On January 7, the U.S. Attorney for the Southern District of New York, the OCC, and FinCEN announced the resolution of criminal and civil BSA/AML violations by a major financial institution in connection with the bank’s relationship with Bernard L. Madoff Investment Securities and Madoff Securities’ Ponzi scheme. The bank entered into a deferred prosecution agreement (DPA) to resolve two felony violations of the Bank Secrecy Act: (i) that the bank failed to enact adequate policies, procedures, and controls to ensure that information about the bank’s clients obtained through other lines of business – or outside the United States – was shared with compliance and AML personnel; and (ii) that the bank violated the BSA by failing to file a Suspicious Activity Report on Madoff Securities in October 2008. According to the U.S. Attorney, pursuant to the DPA the bank (i) agreed to waive indictment and to the filing of a Criminal Information; (ii) acknowledged responsibility for its conduct by, among other things, stipulating to the accuracy of a detailed Statement of Facts; (iii) agreed to pay a $1.7 billion non-tax deductible penalty in the form of a civil forfeiture (the largest ever financial penalty imposed by the DOJ for BSA violations); and (iv) agreed to various cooperation obligations and to continue reforming its BSA/AML compliance programs and procedures. In a separate action, the OCC levied a $350 million civil money penalty to resolve parallel BSA/AML allegations included in a January 2013 cease and desist order. Finally, the bank consented to a FinCEN assessment pursuant to which it must pay an additional $461 million.