Miami-based Ocean Bank faces a nearly $11 million fine to settle charges it turned a blind eye to drug traffickers allegedly using the bank to launder money.
The settlement — which prosecutors, investigators and numerous regulators announced concurrently — was a stunning indictment of the $3.6 billion-asset bank's anti-money laundering efforts.
Authorities said despite the risk of the bank being used by launderers, it failed to institute adequate controls required by the Bank Secrecy Act. Specifically, authorities cited five accounts they said had ties to drug organizations, including three allegedly holding currency and wire transfers from Mexican "casas de cambio" controlled by the Bernal-Palacios trafficking organization. Officials said Ocean ignored certain "red flags" in the five accounts, including unusually large deposits of as much as $140,000 and deposits consisting of thousands of money orders and travelers checks, among other warning signs.
The fine, totaling more than $10.9 million, represents illegal narcotics proceeds that officials say were laundered through the five accounts.
"Ocean Bank has a responsibility to not turn a blind eye to the money laundering activities of drug traffickers," Mark Trouville, a Drug Enforcement Administration special agent in charge of the Miami Field Division, said in a press release issued jointly with other agencies. "In this instance, Ocean Bank failed in its duty to the public and now faces justice."
Officials announced the unsealing of a "criminal information" charging Ocean Bank with, according to the press release, "willfully failing to establish an anti-money laundering program from 2001 through 2008," in violation of the BSA. Yet Ocean, the largest privately held bank headquartered in Florida, may not face further prosecution.
Under the agreement, prosecution is deferred for two years as a result of the fine and will be dismissed completely if the bank fulfills requirements to improve its BSA program outlined in consent orders issued by the Federal Deposit Insurance Corp., the state's Office of Financial Regulation and the Financial Crimes Enforcement Network.
Fincen found several deficiencies in the bank's anti-money laundering program, including that it failed to report suspicious activities indicative of money laundering, and did not operate a program "commensurate with the risks inherent with its business lines and geographical reach."
"The bank's failure to respond to such risk with commensurate systems and controls was both systemic and longstanding," Fincen Director James H. Freis Jr. said in a press release.
In its order, Fincen said the bank had failed to develop an effective BSA program despite the fact that 28% of all of its customers reside outside U.S. borders in areas vulnerable to money laundering, including Venezula, and had direct account relationships in the U.S. with so-called "politically exposed persons."
"Given the high-risk nature of its account base, Ocean lacked adequate policies, procedures and an effective system of internal controls reasonably designed to assess and mitigate the risks of narcotics-related money laundering activity and ensure the detection and reporting of suspicious transactions," Fincen said in its order.
A press release issued by Ocean Bank said all five accounts targeted by investigators had been closed, and the bank was making "meaningful enhancements" to its BSA/AML program. In 2008, the bank "revamped" its senior management, and this year appointed two new managers to specifically handle BSA issues and regulatory risk. Meanwhile, the bank said the large fine was accounted for on its balance sheet in the fourth quarter of 2010, and did not affect its capital position.
"We have cooperated fully with the government's investigation, created an enhanced due diligence/trending unit and training programs for officers, employees and specifically for BSA department employees, added staff in the compliance department, installed new software to strengthen BSA and AML tracking and reporting, and made BSA and AML activities a priority for our staff," the bank said.