Financial Institutions Targeted in DOJ Money Laundering Crackdown

January 11, 2013

Financial Institutions Targeted in DOJ Money Laundering Crackdown

The primary purpose of most criminal enterprises is to generate income. However, the monetary gains come with their own problems -- illicit profits cannot just be deposited in the bank. Instead, the income has to be "cleaned up" and made to look like it came from a legitimate source.

This practice, commonly known as money laundering, has long been a favorite target of federal law enforcement officials. Traditionally, prosecutors have brought money laundering charges against those suspected of perpetrating crimes like drug trafficking, fraud or illicit monetary transfers. Now, though, they have a new target: the banks and financial institutions that facilitate or fail to stop suspected money laundering.

In the past, regulatory offices, including the Office of the Comptroller of the Currency, have been responsible for keeping financial institutions in compliance. The new policy means that the Department of Justice will start to take on a much larger role.

The DOJ has always had the power to bring money laundering cases. For example, in 2010, it brought charges against Wachovia, arguing that the bank failed to prevent Colombian and Mexican drug traffickers from laundering their illicit profits.

The DOJ's renewed focus on money laundering means that more financial institutions can start to expect similar prosecutions. Banking giant HSBC has been identified as a primary target. In fact, HSBC reportedly set aside $700 million to pay penalties stemming from allegations that it let clients make illegal monetary transfers from overseas.

However, it is not just banks that are being targeted. In June 2012, the DOJ brought charges against check-cashing businesses in Los Angeles and New York City, claiming that they failed to implement anti-money laundering initiatives and did not file required transaction reports. Casinos, pawn shops, insurance companies and broker-dealers are also being targeted.

Penalties for Money Laundering

The DOJ's authority to prosecute these cases comes from the Bank Secrecy Act. That law requires financial institutions and their employees to make active efforts to prevent and combat suspected money laundering. As part of the BSA, financial institutions are required to proactively implement anti-money laundering policies.

Violations of the BSA can bring serious penalties. Financial institutions can be required to pay monetary penalties equal to the value of the laundered money. In addition, each conviction under the BSA has the potential to bring between five and 10 years in prison. Individual charges are possible when law enforcement can identify specific actors. However, it is also possible for the DOJ to bring charges against the financial institution itself. This method is more common for investigations involving large financial institutions, since it can be hard to trace allegedly illegal acts back to a defined set of people.

Given the gravity of these charges, it is important for financial institutions to take allegations of money laundering seriously. New York financial institutions that are worried about compliance with the Bank Secrecy Act would be wise to talk with a white collar crime defense attorney before deciding how to move forward.

Article provided by The Law Offices of Robert G. Stahl, LLC
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