Trends in Anti-Money Laundering Enforcement and Compliance

Baker Donelson

Baker Donelson

For years banks and other financial institutions have dealt with the anti-money laundering (AML) requirements of the Bank Secrecy Act (BSA). Governmental agencies, both regulatory and law enforcement, have placed particular emphasis on BSA compliance in the post-9/11 era of the last two decades. Several recent changes in formal BSA regulations, as well as enforcement priorities, have imposed new customer due diligence obligations on banks and other financial institutions as well as placed such institutions in the path of "proxy enforcement actions" against customers that present heightened money laundering risk.

Anti-Money Laundering Landscape

A variety of regulatory and law enforcement agencies at the federal, state and local level have jurisdiction over ensuring that financial institutions comply with the BSA and other AML laws. Banks and other depository institutions are regularly examined for BSA compliance by their primary federal regulators: the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Board of Governors of the Federal Reserve System (the "Federal Reserve"). The Securities and Exchange Commission (SEC) performs much the same function for broker-dealers, and, under a proposed regulation, would also do so for registered investment advisers. Various state regulators such as the New York Department of Financial Services also examine banks and other financial institutions for compliance with AML laws.

The BSA and other AML laws have criminal enforcement provisions, and federal and state law enforcement officials often have a high degree of autonomy in choosing to bring criminal charges. The U.S. Attorney's Office for the Southern District of New York and the New York County District Attorney's Office have been two of the most aggressive prosecutors in pursuing such charges. In addition to traditional law enforcement of BSA/AML crimes, the United States Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) acts as hybrid regulator. Although housed within the Department of the Treasury, FinCEN is tasked with bringing civil enforcement actions for violations of the BSA in broad financial context.

Recent Changes in AML Regulations

While FinCEN has used the enforcement process to steer financial institutions away from high-risk customers and impose individual liability on those responsible for institutions' BSA/AML compliance, it has also utilized the formal rulemaking process to impose new AML program requirements on covered institutions under the BSA. In addition to the proposed investment adviser rule described above, FinCEN has finalized its "enhanced customer due diligence" rule. BSA programs have traditionally been composed of four "pillars" – internal policies, procedures and controls to prevent money laundering; a qualified BSA Officer; ongoing employee AML training; and an independent audit function to test the BSA program. The new rule adds a fifth pillar – enhanced customer due diligence. Under the enhanced customer due diligence pillar, covered financial institutions, including depository institutions, broker-dealers and mutual funds, must verify a customer's identity and purpose for opening an account at the time of account opening. If the customer is an entity rather than a natural person, the financial institution must identify the beneficial owners who "control" the customer at the time of the account opening. The new rule uses a broader definition of "control" than is traditionally used in commercial settings. For example, any person who owns 25 percent or more of the customer would be deemed to "control" the customer. Finally, financial institutions must continue to update and monitor their customer due diligence on a periodic basis. This would include confirming the beneficial ownership of a customer, verifying the customer's and beneficial owners' identities, and understanding the nature and purpose of customer relationships.

FinCEN has not been the only regulator to issue new regulations and guidance in the area of AML. In recent years, each of the OCC, FDIC and Federal Reserve have released guidance on managing third-party relationships, including vendors. Notably, the OCC has expressed a willingness to pursue third-parties who play a significant role in the conduct or affairs of the financial institution under an "institution affiliated party" theory for violations at the financial institution caused by the third-party. While the OCC has not yet pursued a third-party vendor for violations of AML laws at a regulated financial institution, it is possible that the OCC could bring an enforcement action against third-party vendors such as mortgage servicers, software providers or external auditors under its guidance.

Recent Trends in AML Enforcement Actions

Two recent trends in AML enforcement actions are: (i) the use of proxy enforcement actions against banks and other depository institutions as a means of forcing such institutions to "debank" customers who present heightened money laundering risk, such as foreign account holders and money services businesses (MSB) and (ii) actions against individuals responsible for an institution's BSA/AML compliance.

In issuing two recent enforcement penalties, FinCEN noted that the penalized depository institutions failed to maintain BSA/AML programs that adequately addressed the money laundering risk posed by their customer bases. In December 2016, FinCEN issued a $500,000 civil money penalty to Bethex Federal Credit Union (Bethex). Among other violations, Bethex failed to maintain an AML program reasonably designed to monitor the high number of foreign payment transactions in its customer accounts. Merchant's Bank of California (Merchant's) was fined $7 million by FinCEN and $1 million by the OCC for similar issues in February 2017. In addition to failing to perform adequate monitoring of foreign transaction accounts, Merchant's was fined for failing to do appropriate customer due diligence and detect and report suspicious activity with regards to the accounts of MSB customers. FinCEN also has direct enforcement jurisdiction over MSBs under the BSA. FinCEN and the U.S. Department of Justice reached a $586 million settlement with Western Union to resolve AML violations in January 2017 and imposed enhanced compliance requirements.

Regulators and law enforcement have, in recent years, sought to ensure compliance with AML laws by bringing enforcement actions directly against individuals responsible for institutions' AML compliance programs. In March 2017, the Chief Compliance Officer and BSA Officer of Trident Partners Ltd. were sentenced to six months in prison for participating in a money laundering scheme that diverted customer money. In May 2017, FinCEN secured a $250,000 civil money penalty in the U.S. District Court for the Southern District of New York against the former Chief Compliance Officer of MoneyGram for his alleged role in MoneyGram's failure to implement an effective BSA/AML program, specifically the failure to file necessary suspicious activity reports (SAR). This penalty was the largest ever imposed by FinCEN against an individual and only the second time in FinCEN's history that it sued to enforce a civil money penalty.

Key Takeaways and Next Steps

Several key takeaways are evident both in reviewing recent AML enforcement and regulatory actions as well as the government's continued interest in bringing enforcement actions against money launderers:

  • Community banks and other small financial institutions will continue to be targets of regulatory and law enforcement scrutiny, especially where those institutions have customers such as MSBs, casinos or cash-intensive businesses that present a heightened risk of money laundering activity. These institutions are at a heightened risk of AML enforcement, because they often do not have the resources to implement BSA/AML programs required by the heightened expectations of regulators.
  • Non-bank lenders and lessors and MSBs are attracting more regulatory attention than in years past. From 2014 to the present, a full 39 percent of FinCEN enforcement actions have been directed at non-bank lenders and MSBs. This is in comparison to depository institutions which only accounted for 24 percent of FinCEN enforcement actions.
  • Financial institutions such as mortgage servicers and other depository institution service providers that do not have BSA/AML program requirements are still at risk from AML enforcement actions. To the extent such financial institutions pose money laundering risk, regulatory and law enforcement agencies may pursue proxy enforcement actions to convince banks and other depository institutions to drop such customers. Additionally, the OCC and other bank regulators could pursue such financial institutions as "institution affiliated parties" for facilitating violations of AML laws at regulated depository institutions.
  • While non-bank lenders are not required to maintained a BSA/AML program, these institutions may present a heightened risk of being utilized for money laundering and should consider voluntarily implementing BSA/AML programs.

Financial institutions can take several steps in order to mitigate the risk associated with these trends:

  • Adopt a front-, middle- or back-end strategy. First, train employees, officers and directors on the front-end about money laundering risks and AML laws applicable to your institution. This includes training for customer-facing employees who are the front line of defense against money laundering, and at least annual training for directors and senior executive officers on changes in AML laws. As a middle step, perform customer due diligence, including due diligence on beneficial owners of customers and consider whether to even open accounts for customers in industries with a high-risk of money laundering. On the back-end, maintain a strong internal audit function that tests your BSA/AML program, especially the Cash Transaction Report and SAR reporting functions.
  • Think like a bank. Banks and other depository institutions have long had the most sophisticated BSA/AML programs. Other institutions with BSA compliance obligations should look to bank BSA/AML programs for guidance, including performing enhanced customer due diligence, empowering a qualified BSA Officer (possibly with bank experience), proactively seeking guidance from FinCEN and considering whether to accept customers from high-risk jurisdictions or in high-risk industries.
  • Financial institutions without BSA/AML program obligations should consider voluntarily establishing BSA/AML programs. Such voluntary programs would not only help to identify and prevent money laundering, but would mitigate the risk of proxy enforcement actions or institution affiliated party enforcement actions, and in the event of an enforcement action, would likely result in leniency by the applicable regulatory or law enforcement agency.
  • Contact counsel related to any unclear BSA/AML issues and consider having counsel review your BSA/AML program or conduct training with directors and officers.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Baker Donelson | Attorney Advertising

Written by:

Baker Donelson

Baker Donelson on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.