Several years ago, at a risk management presentation I was giving to officers and directors of a major bank in the Dominican Republic, I asked the bank's principal owner how he handled AML compliance for accounts of local money service businesses. He replied that he did not allow any of them to open accounts at the bank, due to their extremely high-risk nature, chronic AML deficiencies, and probability of influence or control of narcotics traffickers.
How can a small, suburban New Jersey bank process more than $1.5bn in transactions with four Casas de Cambio, located in such high-risk jurisdictions as Mexico and the Dominican Republic, for over two years, without being noticed by US regulators and law enforcement agencies ? That's what happened at the now-defunct tiny (and undercapitalized) Saddle River Valley Bank, of Montclair, New Jersey. What's wrong with this picture ?
The bank, whose holding company was recently handed an $8.2m civil penalty by OCC, FinCEN, and the US Attorney in the District of New Jersey, admitted that it failed to file 190 SARs. Surely all this traffic, particularly with Mexican Casas de Cambio, must have been noticed by Federal law enforcement agencies, who were already watching the MSBs for other reasons. And what about those Dominican Casas de Cambio; I know that they are regular investigative targets.
What this case demonstrates is the folly of long-term monitoring; allowing these MSBs to move billion of dollars through a US bank, while you patiently monitor the target, allows the money launderers to sue the bank, and then move on to another, as yet unknown to you, and do it again.
I am aware that the idea is to identify all the narcotics traffickers involved, but this method, which appears to be ingrained in law enforcement policy, results in major short-term successes for the money launderers. When you have cleaned over a billion dollars, as a money launderer, they have beaten the system; filing criminal indictments two to four years later is too little, too late, in my opinion.
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