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examples of enforcement Measures and sanctions in some Jurisdictions
BOX 6.3 (continued)
outlet it wishes to use and in a format that corresponds to the violation committed and the sanction imposed. the costs of such notices are borne by the entity sanctioned. However, the committee’s decision may be published without specifying names in certain exceptional cases where there could be a “risk of seriously disrupting financial markets or of causing a disproportionate prejudice to the parties involved.”
Sanctions to Be Applied to Directors and Senior Management
Where there has been a failure to comply with AML/CFt requirements, sanctions may be applied not only to the financial institution but also to its directors, senior management, controlling owners, and other employees of regulated entities.
Where directors and senior management facilitate or are responsible for AML/CFt violations by the institution, whether by commission or omission including negligence, they should be held accountable and subject to appropriate sanctions. serious and deliberate violations of directors and senior management should be escalated to the law enforcement and prosecution authorities. the scope of application is to directors and senior management only, on the assumption that compliance failures at the lower ranks of the organization are their ultimate responsibility. nevertheless, since the tipping-off prohibition extends to all employees, there should be sanctions for all employees who breach this obligation. In the United Kingdom, for example, a financial penalty of £25,600 was imposed on the money-laundering reporting officer at sonali Bank UK who, in successive years, failed to put in place an adequate compliance monitoring system, despite the warnings of internal auditors (Financial Conduct Authority 2016).
EXAMPLES OF ENFORCEMENT MEASURES AND SANCTIONS IN SOME JURISDICTIONS
Remedial Measures
enforcement measures are intended to instruct the financial institution to remediate deficiencies expeditiously. Remedial measures aim to strengthen the AML/CFt compliance system of an institution and, more generally, to foster a culture of compliance. Where applicable, remedial measures should include action plans with well-defined timelines and follow-up action by the supervisor to ensure compliance.
When applying remedial measures, it is very important that supervisors clearly communicate their expectations and requirements to the financial institution with respect to the deficiencies and required measures. Major issues should always be brought to the attention of the board and senior management, who should be held accountable for implementing the remedial measures required. the example in box 6.4 summarizes an agreement to remedy AML/CFt deficiencies in a bank in the United states.
BOX 6.4 Example of an Enforcement Action in the United States, July 2018
the most recent examination of the new York branch of United Bank Ltd., conducted by the Federal Reserve Bank of new York, identified deficiencies relating to the branch’s risk management and compliance with federal and state laws, rules, and regulations relating to anti-money-laundering (AML) compliance under the Bank secrecy Act.
Corporate governance and management oversight. Union Bank’s board of directors and the new York branch’s management agreed to, within 60 days of the agreement, submit jointly a written plan to enhance oversight by the management of Union Bank and its new York branch of the branch’s compliance with the Bank secrecy Act’s AML requirements and with regulations issued by the office of Foreign Assets Control of the Us Department of the treasury and acceptable to the new York Federal Reserve Bank.
Compliance review. Union Bank and its new York branch agreed to, within 30 days of the agreement, retain an independent third party acceptable to the new York Federal Reserve Bank to (a) conduct a comprehensive compliance review and (b) prepare a written compliance report of its findings, conclusions, and recommendations.
Compliance program. Union Bank and the new York branch agreed to, within 60 days of submission of the compliance report, jointly submit a written, revised Bank secrecy Act AML compliance program acceptable to the new York Federal Reserve Bank.
Customer due diligence. Union Bank and the new York branch agreed, within 60 days of submission of the compliance report, to submit jointly a written revised customer due diligence program for the branch acceptable to the new York Federal Reserve Bank.
Suspicious activity monitoring and reporting program. Union Bank and the new York branch agreed, within 60 days of submission of the compliance report, to submit a written program reasonably designed to ensure the identification and timely, accurate, and complete reporting by the branch of all known or suspected violations of law or suspicious transactions to law enforcement and supervisory authorities, as required by applicable suspicious activity reporting laws and regulations acceptable to the Federal Reserve Bank.
Source: New York Federal Reserve Bank, https://www.federalreserve.gov/newsevents/pressreleases/files /enf20180712a1.pdf.
Examples of Civil and Administrative Sanctions
Box 6.5 presents examples of civil and administrative sanctions that can be applied in some jurisdictions to financial institutions that fail to meet their AML/CFt obligations.
United States. the Financial Crimes enforcement network (FinCen), the Us financial intelligence unit (FIU), is authorized to assess civil money penalties against a financial institution, nonfinancial trade or business, or a partner, director, officer, or employee of a financial institution or nonfinancial trade or business for violations of the anti-money-laundering (AML) law. these violations can include failures in record keeping, reporting, or maintaining an adequate AML program. FinCen may assess a civil fine of not less than two times the amount of the transaction up to Us$1 million against a financial institution that violates the AML requirements of due diligence on correspondent and private banking or the prohibition on correspondent shell banks (FAtF 2015b).
The Republic of Korea. Korea’s FIU delegated its supervisory authority to the Financial supervisory service and other entrusted agencies, including the power to impose administrative sanctions. the entrusted agencies have the power to issue corrective orders, give warnings or cautions to a financial institution or casino, and partially or fully suspend a license. Additionally, the entrusted agencies can apply administrative sanctions to senior management (reprimand warning, cautionary warning, and caution) and employees (removal, suspension, salary reduction, reprimand, and caution). entrusted agencies do not have the ability to impose monetary sanctions, but Korea’s FIU can impose them on request by the entrusted agencies. Monetary sanctions can be (and are) applied concurrently for each identified violation. With the recent increase in the level of monetary sanctions, each violation can be penalized by ₩100 million (€77,044). If 100 counts are identified as breaching customer due diligence requirements, the maximum monetary fine can be ₩100 million multiplied by 100 counts, that is, ₩10 billion (€7.7 million) (FAtF 2020).
Malta. Findings of anti-money-laundering and combating terrorism financing (AML/CFt) supervisory examinations undertaken by the Financial Intelligence Analysis Unit (FIAU) or by the Malta Financial services Authority and Malta Gaming Authority that indicate AML/CFt shortcomings are referred to the FIAU’s Compliance Monitoring Committee. the Compliance Monitoring Committee is an internal FIAU committee, composed of FIAU officials from the compliance section (the three most senior officers) and legal section (the manager of the legal section or his or her representative) as well as the director and deputy director of the FIAU. the committee is responsible for reviewing potential breaches of AML/CFt obligations and, where breaches subsist, for imposing administrative penalties or requesting remedial action. the officers carrying out the supervisory examination are invited to present their findings and the subject person’s submissions in front of the Compliance Monitoring Committee. the committee may decide to impose a reprimand, a monetary sanction, or both. Concurrently and independently of an administrative sanction, subject persons may be required to rectify their shortcomings and, if deemed necessary, the committee may request that the subject person provide an action plan (FAtF 2019b).
Examples of Criminal Sanctions
Box 6.6 provides examples of criminal sanctions that can be applied in some jurisdictions to financial institutions that fail to meet their AML/CFt obligations.
