Wednesday, September 3, 2014


Sometimes, when you read the details of regulatory fines and penalties, you may find there are signs that one regulatory body has not been paying attention to the actions of its sister agencies. This week, FinCEN levied a civil penalty against a closed money service business, BPI, Inc.,which was formerly located in Newark, New Jersey.The fine, which was for fatal BSA deficiencies, was in the amount of $125,000 .

The MSB, notwithstanding "repeatedly being cited in 2005 and 2006 for serious concerns with its anti-money laundering (AML) program by examiners, ... failed to address these and other cited deficiencies." In 2011, a new audit found that, not only has none of the deficiencies cited been addressed, the MSB had never filed a single SAR. Additionally, BPI had allowed customers to use its services without identification documents, and with expired identification. The MSB still had major deficiencies in its internal controls, in training, and in independent testing of its AML program. In short, BPIs AML program was a failure. Anything remotely connected to it should be red-flagged for investigation.

Now, in 2013, the MSBs parent, a prominent Portuguese bank, Banco BPI, S.A., applies to, and is granted, by the Board of Governors of the Federal Reserve System, a license to open a representative office, in Newark. The required notice is duly published in local media, in New Jersey, and in rural New Bedford, Massachusetts; there is no publication in either New York, or Washington, which might have caught the attention of some sharp auditors, or other Federal regulatory agencies. Who reads the Newark Star-Ledger, other than local New Jersey residents ? I understand that the publication may have met the requirements of the law, but the chosen newspapers of general circulation were cheaper to advertise in than the Washington Post.  As soon as the bank got its license, they closed up the MSB; smart move.
(Not read by the financial community)
(from rural Mass.)

Did whoever was conducting the routine investigation into Banco BPI fail to learn that BPI Inc, the bank's wholly-owned MSB, was an AML nightmare, or was that information ignored ? Either way, somebody may have dropped the ball here. I wonder if regulators have looked at the Banco BPI rep office lately ? What specific types of authorized, limited business, for existing clients from Portugal, is it conducting ? What about all the MSBs customers, as it has been closed since the bank opened its rep office ?

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