$7 Million - Impeding Compliance Staff

The Financial Crimes Enforcement Network (FinCEN) levied a $7 million fine against Merchants Bank of California for impeding compliance staff and threatening to fire staff who attempted to report suspicious banking activity.

It is very clear that dismissal and retaliation was the stick this company had over its employees. This is a glaring example of a weakened culture and compliance program which prevented employees from reporting suspicious activity. 

Among other issues, Merchants failed to provide the necessary level of authority and independence and responsibility of its Compliance Officer. Their compliance staff was not empowered with sufficient authority and autonomy to implement the banks’ compliance program.

Specifically, FinCEN cited that the compliance program, among other things:

• Failed to define a permanent department structure
• Failed to establish the Compliance Officers roles and responsibilities and how they would be successfully be performed
• The bank relied on other internal department to determine risks

What can we learn?

Even though this is the banking industry the elements of a compliance program are universal among all regulated industries. We all should heed the issues found in this report and reflect on our own compliance programs or use it as an example for clients.

What is FinCEN?

The Financial Crimes Enforcement Network (FinCEN) is the investigative arm that investigates banks for compliance with and violation of the Bank Secrecy Act (BSA).