FinCEN fines Lone Star National Bank $2 million

The Financial Crimes Enforcement Network (FinCEN) has announced the assessment of a $2 million civil money penalty against Lone Star National Bank (Lone Star) of Pharr, Texas, for willfully violating the Bank Secrecy Act (BSA). The assessment order notes that, among other lapses, Lone Star failed to comply with section 312 of the USA PATRIOT Act, which imposes specific due diligence obligations with respect to correspondent banking. "The action underscores the dangers that institutions face when taking on international correspondence activities without properly equipping themselves to manage such business," said FinCEN.

FinCEN said that "Lone Star’s Mexican financial institution customer was moving millions of dollars through Lone Star in a manner inconsistent with the parameters of a relationship which, at the outset, required greater scrutiny. Lone Star failed to identify and consider public information about the foreign bank owner’s alleged involvement in securities fraud. It also failed to verify the accuracy of assertions by the foreign bank with respect to source of funds, purpose of the account, and expected activity." FinCEN Acting Director Jamal El-Hindi was quoted as saying, "Notwithstanding the fact that the OCC already fined the bank [in 2015], FinCEN’s assessment takes into account the penalties specifically applicable under FinCEN’s Section 312 authority. Smaller banks, just like the bigger ones, need to fully understand and follow the 312 due diligence requirements if they open up accounts for foreign banks. The risks can indeed be managed, but not if they are ignored."