MIAMI, FL. – Ocean Bank, the largest privately-owned state-chartered commercial bank headquartered in Florida, has entered into a deferred prosecution agreement (“the Agreement”) with the U.S. Attorney’s Office in the Southern District of Florida to resolve charges that it willfully failed to establish an anti-money laundering program. Today’s Agreement is the result of an investigation into Ocean Bank’s handling of several of its customers’ accounts that included transactions involving Mexican currency exchange houses, commonly known as “casas de cambio” (CDCs), announced Mark R. Trouville, Special Agent in Charge, Drug Enforcement Administration (DEA), Miami Field Division, Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), Fred A. Maas, Chief, Sunny Isles Beach Police Department James H. Freis, Jr., Director, Financial Crimes Enforcement Network (FinCEN) , Sandra L. Thompson, Director, Division of Risk Management Supervision, Federal Deposit Insurance Corporation (FDIC), and Tom Cardwell, Commissioner, Florida Office of Financial Regulation (OFR).
A Criminal Information, filed August 12, 2011 and unsealed today, charges Ocean Bank with willfully failing to establish an anti-money laundering program from 2001 through June 2008, in violation of the Bank Secrecy Act (BSA). According to the information and other documents filed with the court, including a detailed Factual Statement and the Agreement, Ocean Bank failed to effectively monitor for potential money laundering activity in five subject accounts reviewed by investigators.
As part of the Agreement filed August 15, 2011 and unsealed today, Ocean Bank has agreed to forfeit $10,988,136 to the United States, which represents the proceeds of illegal narcotics sales that were laundered through Ocean Bank through the five accounts reviewed by investigators. The $10,988,136 is due within five days from the date of the Agreement.
In addition, FinCEN, FDIC and OFR have each also assessed a $10.9 million Civil Money Penalty that is deemed satisfied by the forfeiture of the $10,988,136 to the U.S. Department Justice, for serious and systemic BSA violations. Moreover, FDIC, OFR and FinCEN have each issued Consent Orders to Ocean Bank requiring Ocean Bank to comply with the BSA and to abide by any orders and regulations of the regulators.
“Ocean Bank has a responsibility to not turn a blind eye to the money laundering activities of drug traffickers,” said Mark R. Trouville, DEA’s Special Agent in Charge of the Miami Field Division. “In this instance, Ocean Bank failed in its duty to the public and now faces justice.”
Wifredo A. Ferrer, United States Attorney, stated, “Today, we are announcing the deferred prosecution of Ocean Bank, the largest privately-owned state-chartered commercial bank headquartered in Florida, for its blatant failure to establish and maintain an effective anti-money laundering program and its repeated disregard of the Bank Secrecy Act. Just a little over a year ago, we announced the deferred prosecution of Wachovia, one of the largest banks in the United States, for similar failures. And we are not done. Corporate citizens, no matter how big or powerful, will be held accountable for their actions.”
IRS Special Agent in Charge José A. Gonzalez stated, “The IRS Criminal Investigation Division through its expertise in financial investigative techniques followed the money trail in this very serious case of criminal conduct. The financial investigators uncovered millions of dollars of suspicious financial transactions that went unreported by Ocean Bank and ultimately facilitated the laundering of narcotics proceeds from several trafficking organizations. The financial transactions included structured currency deposits, wire transfers originating from Mexican Casas de Cambio and unusual money order and cashier’s check deposits. The investigation of Ocean Bank demonstrates our commitment to holding accountable those banks that fail to comply with the Bank Secrecy Act.”
Chief Fred Maas, Sunny Isles Beach Police Department said, “Municipal police agencies, regardless of size, are committed to partnering with federal and state authorities in the fight against narcotics trafficking by seeking compliance with anti-money laundering laws and guidelines, including the reporting of suspicious and illicit activities by financial institutions.”
“Effective Bank Secrecy Act/anti-money laundering programs commensurate with the risk profile of the institution is paramount in protecting our financial system and individual banks from harm,” said Sandra L. Thompson, Director, Division of Risk Management Supervision. “This penalty underscores the significance for banks to have strong internal systems and controls to detect and report suspicious activity and ensure compliance with Bank Secrecy Act requirements.”
“The Bank failed to recognize and mitigate risks and report transaction activity often associated with money laundering involving direct foreign account relationships in high-risk jurisdictions,” noted FinCEN Director James H. Freis, Jr. “The Bank’s failure to respond to such risk with commensurate systems and controls was both systemic and longstanding.”
In light of Ocean Bank’s willingness to acknowledge responsibility for its actions and omissions, its full and truthful cooperation and remedial actions taken to date, and its promised continued cooperation and remedial actions in the future, the United States Attorney’s Office has agreed to defer prosecution of the criminal charge in the information for 24 months. If Ocean Bank fully complies with its obligations under the Agreement, the United States Attorney’s Office agrees to dismiss the criminal information at the end of the 24 months. Earlier today, the Agreement was accepted in federal court in Miami by U.S. District Court Judge Jose Martinez.
According to the documents filed with the court, Ocean Bank was aware, as early as 1996, of the high risk that drug money was being laundered through CDCs. Ocean Bank was also aware of its overall high risk rating with regards to its BSA and anti-money laundering (AML) program due, in part, to Ocean Bank’s high percentage of international account holders and international transactions. Notwithstanding its overall high risk rating, warnings from state and federal regulators, DEA and other AML organizations about money laundering risks, Ocean Bank did not provide the necessary BSA/AML controls to mitigate its high risk rating.
According to documents filed with the court, investigators specifically reviewed five subject accounts at Ocean Bank. In three of the five accounts, Ocean Bank failed to properly monitor and notify law enforcement that deposits into these accounts consisted mainly of currency and wire transfers originating from Mexican CDCs that were controlled by the Bernal-Palacios drug trafficking organization. The Bernal-Palacios organization used the CDCs to transfer their narcotics proceeds to different bank accounts around the world, including the three subject accounts at Ocean Bank.
According to documents filed with the court, a fourth account was used by a Miami-area business to launder narcotics proceeds. This business accepted large sums of cash from convicted drug traffickers and money launderers, which the business then deposited into its Ocean Bank account. Notwithstanding such large cash deposits and a wire transfer, which appeared to be inconsistent with the account holder’s purported business, Ocean Bank failed to perform enhanced due diligence and/or notify law enforcement in a timely fashion of the suspicious activity in the account.
Lastly, according to the documents filed today, the last of the five accounts was used by another Miami-area business to launder narcotics proceeds. That business maintained an operating account at Ocean Bank from October 1990 through at least December 2009, which received incoming wire transfers from several Mexican CDCs.
Among the “red flags” of potential money laundering activity in these five accounts, ignored by Ocean Bank, were: unusually large cash deposits, ranging from $10,000 to $140,000, which were unsupported by the purported customer’s business model; structured cash deposits in amounts of less than $10,0000 to avoid bank currency reporting requirements; deposits of thousands of money orders and travelers checks, many of which were sequentially numbered; hundreds of incoming wire transfers originating from Mexican CDC’s; and same day incoming and outgoing wire transfers in large round dollar amounts. Ocean Bank failed to report these suspicious transactions.
According to court documents, at least since 2001, Ocean Bank failed to take appropriate steps to correct identified deficiencies in its BSA/AML program. For example, in 2001, the FDIC and OFR noted deficiencies in Ocean Bank’s BSA and AML programs and made recommendations to Ocean Bank on how to fix the problems. Then, in March 2004, the FDIC and the OFR’s Quarterly Supervisory On-site Review at Ocean Bank noted a continuation of the previous weaknesses and additional deficiencies in the BSA/AML systems, and a large volume of high-risk accounts that lacked the appropriate customer due diligence. As a result, in 2004, the regulators recommended, and Ocean Bank adopted, a Corrective Action Program, aimed at addressing the weaknesses in Ocean Bank’s BSA/AML program. Despite the 2004 Corrective Action Program, Ocean Bank failed to develop and maintain an effective AML program. The same deficiencies continued throughout 2005 and 2006. Finally, in 2007, the FDIC and the OFR jointly issued a Cease and Desist Order to Ocean Bank in response to its serious chronic problems with its BSA/AML program and its failure to correct the problems. That Cease and Desist Order remained in effect until May 2011, when it was replaced with a modified Consent Order.
In sum, according to the Factual Statement filed with the court and agreed to by Ocean Bank, Ocean Bank had significant compliance failures, including failing to maintain sufficient documentation through which to develop customer profiles (know your customer/due diligence), failing to maintain adequate account monitoring systems that would help identify suspicious account activity, failing to identify high risk customers and transactions, failing to identify activity that warranted the filing of a suspicious activity report, and failing to maintain a well-trained staff in the BSA compliance department.
An Information is only an accusation and a defendant is presumed innocent until proven guilty.