Former U.S. Bank official gets CMP for BSA failings

The Financial Crimes Enforcement Network has assessed a civil money penalty of $450,000 on Michael LaFontaine, former Chief Operational Risk Officer (and, before that, Deputy Risk Officer and Chief Compliance Officer) at U.S. Bank National Association, for his failure to prevent violations of the Bank Secrecy Act (BSA) and regulations issued pursuant to that Act which occurred at the Bank during his tenure.

Among other things, Mr. LaFontaine failed to take sufficient steps to ensure that the Bank’s compliance division was appropriately staffed to meet regulatory expectations. Both prior to and during Mr. LaFontaine’s tenure, the Bank improperly capped the number of alerts generated by its automated transaction monitoring system and failed to adequately staff the BSA compliance function. {In February 2018, FinCEN, in coordination with the Office of the Comptroller of the Currency (OCC) and the U.S. Department of Justice, issued a $185 million civil money penalty against U.S. Bank for, among other things, willfully violating the BSA’s requirements to implement and maintain an effective anti-money laundering (AML) program and to file Suspicious Activity Reports (SARs) in a timely manner.)

The Bank adopted AML policies, procedures, and controls that it knew would cause it to fail to investigate and report suspicious and potentially illegal activity. Such policies, procedures, and controls included caps on the number of alerts U.S. Bank’s automated transaction monitoring system would generate for review, a failure to include Western Union money transfers processed at the Bank in the automated transaction monitoring system, and inadequate procedures for identifying and addressing high-risk customers. Second, U.S. Bank employed a woefully inadequate number of AML investigators, thus violating the BSA’s requirement that it designate a compliance officer and provide that officer with the resources necessary to fulfill his/her responsibilities. Even when the Bank had more than $340 billion in assets, it employed only approximately 30 AML investigators.

U.S. Bank failed to timely file thousands of Suspicious Activity Reports (“SARs”). Bank employees understood through internal testing and other means that the inadequate AML policies described above caused the Bank to fail to identify and report large numbers of suspicious transactions. Subsequent analysis of the Bank’s transactions has revealed that it failed to timely file thousands of SARs, including on transactions that potentially laundered the proceeds from crimes.