The Financial Crimes Enforcement Network (FinCEN) today announced that Capital One, National Association (Capital One) has been assessed a $390,000,000 civil money penalty for engaging in both willful and negligent violations of the Bank Secrecy Act (BSA) and its implementing regulations.
Specifically, FinCEN determined and Capital One admitted to willfully failing to implement and maintain an effective Anti-Money Laundering (AML) program to guard against money laundering. Capital One also admitted that it willfully failed to file thousands of suspicious activity reports (SARs), and negligently failed to file thousands of Currency Transaction Reports (CTRs), with respect to a particular business unit known as the Check Cashing Group. The violations occurred from at least 2008 through 2014, and caused millions of dollars in suspicious transactions to go unreported in a timely and accurate manner, including proceeds connected to organized crime, tax evasion, fraud, and other financial crimes laundered through the bank into the U.S. financial system. As stated in the Assessment of Civil Money Penalty, Capital One admitted to the facts set forth by FinCEN and acknowledged that its conduct violated the BSA and regulations codified at 31 C.F.R. Chapter X.
“The failures outlined in this enforcement action are egregious,” said FinCEN’s Director Kenneth A. Blanco. “Capital One willfully disregarded its obligations under the law in a high-risk business unit. Information received from financial institutions through the Bank Secrecy Act plays a critical role in protecting our national security, and depriving law enforcement of this information puts our nation and our people at risk. Capital One’s failures did just that. Capital One’s egregious failures allowed known criminals to use and abuse our nation’s financial system unchecked, fostering criminal activity and allowing it to continue and flourish at the expense of victims and other citizens. These kinds of failures by financial institutions, regardless of their size and believed influence, will not be tolerated. Today’s action should serve as a reminder to other financial institutions that FinCEN is committed to protecting our national security and the American people from harm and we will bring appropriate enforcement actions where we identify violations.”
As outlined in the Assessment, in 2008, after Capital One acquired several other regional banks, Capital One established the Check Cashing Group as a business unit within its commercial bank. The group was comprised of between approximately 90 and 150 check cashers in the New York- and New Jersey-area. Capital One provided banking services to the Check Cashing Group, including providing armored car cash shipments and processing checks deposited by Check Cashing Group customers. During the course of establishing the Check Cashing Group and banking these customers, Capital One was aware of several compliance and money laundering risks associated with banking this particular group, including warnings by regulators, criminal charges against some of the customers, and internal assessments that ranked most of the customers in the top 100 of the bank’s highest risk customers for money laundering.
Despite the warnings and internal assessments, Capital One willfully failed to implement and maintain an effective AML program in many ways. Capital One’s process for investigating suspicious transactions was weak and resulted in the failure to fully investigate and report suspicious activity to FinCEN. Capital One often failed to detect and report suspicious activity by the check cashers themselves, even as it detected and reported activity by the check casher’s customers. And Capital One’s implementation of a specialized report to provide insight into larger checks cashed by the Check Cashing Group customers’ customers (the check cashers’ patrons) failed to properly connect and report suspicious banking activity by certain check cashers.
Capital One also acknowledged failing to file SARs even when it had actual knowledge of criminal charges against specific customers, including Domenick Pucillo, a convicted associate of the Genovese organized crime family. Pucillo was one of the largest check cashers in the New York-New Jersey area, and one of the highest-risk Check Cashing Group customers. Capital One was made aware of Pucillo’s participation in potential criminal activity and other risks on several occasions, including learning in early 2013 about potential criminal charges in two different jurisdictions. Despite this information, Capital One failed to timely file SARs on suspicious activity by Pucillo’s check cashing businesses, and continued to process over 20,000 transactions valued at approximately $160 million, including cash withdrawals, for Pucillo’s businesses. According to public sources, in May 2019 Pucillo pleaded guilty to conspiring to commit money laundering in connection with loan sharking and illegal gambling proceeds that flowed through his Capital One accounts.
Capital One also admitted to negligently failing to file CTRs on approximately 50,000 reportable cash transactions representing over $16 billion in cash handled by its Check Cashing Group customers. Specifically, Capital One utilized an internal system that assigned a “cash” code for customer withdrawals to trigger CTR filings. In designing its system, Capital One failed to assign this “cash” code to armored car cash shipments for a number of Check Cashing Group customers. Accordingly, these transactions were not identified as customer cash withdrawals and were not reported to FinCEN through Capital One’s CTR reporting systems.
In determining the final amount of the civil money penalty, FinCEN considered Capital One’s significant remediation and cooperation with FinCEN’s investigation. In addition to exiting the Check Cashing Group and taking specific remedial efforts related to its SAR and CTR filing systems, Capital One has made significant investments in and improvements to its AML program over the past several years. The bank also provided FinCEN with voluminous and well-organized documents, made several presentations of its findings, and signed several agreements tolling the statute of limitations during this investigation. FinCEN strongly encourages financial institutions and other businesses and individuals subject to the BSA to self-disclose any violations of FinCEN’s regulations and cooperate with its enforcement investigations.
This news item was originally published by the Financial Crimes Enforcement Network (FinCEN US). For more information, please see the Source Link.