Stiff Fines Prompt Amex to Bolster Money-Laundering Vigilance

Besides paying a hefty fine, the bank will be instituting new safeguards to prevent money-laundering.

American Express Bank International learned an expensive lesson when it agreed on Aug. 6 to pay a stiff penalty to the federal government after admitting that it failed to install and maintain anti-money-laundering software at its Miami office.

The bank, which has about $1 billion in assets, must fork over a whopping $65 million, including $55 million in restitution and $10 million in penalties to the Department of the Treasury, as a result of negligence in its banking and compliance practices.

A criminal information affidavit filed in U.S. District Court in Miami charged the bank with a single count of failing to maintain an effective anti-money-laundering program, and Amex decided not to fight the charge and to take the fine instead.

The investigation raises obvious questions about why the banks executives failed to address the money-laundering problems earlier. The transgressions apparently had been happening for several years, according to the federal affidavit.

During a lengthy investigation, Department of Justice investigators found a number of American Express bank accounts that they believed were used to launder about $55 million in payments for distributors in the South American black market. Money brokers, from apparently legitimate South American businesses using offshore shell companies, exchanged U.S. dollars from those accounts for currency from countries such as Venezuela, Colombia, and Brazil to make the payments.

Undercover law enforcement agents working as go-betweens for Colombian drug traffickers discovered the money laundering.

The banks problem was that it had money-laundering controls and policies in place, but apparently the overseers administering them werent enforcing them.

"We have had an anti-money-laundering compliance program in place for many years," Susan Aftran, vice president of communication for American Express Bank International told eWEEK.

/zimages/1/28571.gifClick here to read about the lawsuit brought against TJX for "negligent misrepresentation."

"The program includes policies and procedures, training, and independent audit functions, as well as designated AML [anti-money-laundering] compliance officers. We have enhanced the program in recent months and intend to continue to enhance it in the future."

But Jacob Jegher, a senior analyst at Celent, a Boston-based financial research and consulting firm, said theres really no excuse for something like this.

"Like anything else in banking, you have to have solid compliance controls and policies in place at all times for regulators and auditors," Jegher said. "And you have to have the right people running [the program].

"This is just another example of that fact that if you get lax on the rules and dont pay attention, youre going to eventually get burned. Its not that complicated."

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Chris Preimesberger

Chris Preimesberger

Chris Preimesberger is Editor of Features & Analysis at eWEEK, responsible in large part for the publication's coverage areas. In his 12 years and more than 3,900 stories at eWEEK, he has...