October 3, 2023

NY-based bank pays $25 million to resolve AML compliance failures

On September 29, 2023, the Federal Deposit Insurance Corporation (“FDIC”), the Financial Crimes Enforcement Network (“FinCEN”) and the New York State Department of Financial Services (“NYDFS”) announced the assessment of civil money penalties against Shinhan Bank America (“SHBA”), a wholly-owned subsidiary of South Korea-based Shinhan Bank Co., Ltd, for repeated violations of Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) requirements and New York law between 2016 and 2021.  SHBA is headquartered in New York and operates primarily in New York and Southern California.  SHBA was assessed a $5 million civil money penalty by the FDIC and a $15 million penalty by FinCEN for violating the BSA; however, SHBA will pay the US Department of the Treasury $15 million to satisfy both assessments.  In a separate settlement, SHBA agreed to pay the NYDFS $10 million in civil penalties.

The agencies determined that SHBA willfully failed to implement and maintain an effective BSA/AML program and, thereby, failed to timely report several hundred transactions worth tens of millions of dollars to FinCEN involving suspicious financial activity, including transactions connected to tax evasion, public corruption, money laundering, and other financial crimes.  After serious deficiencies were discovered by the FDIC in 2017, the FDIC issued SHBA a consent order in which the bank was required to make several improvements to its BSA/AML compliance program.  In 2020, SHBA also entered into a Memorandum of Understanding (“MOU”) to address continued compliance deficiencies identified by the NYDFS.  In 2021, the NYDFS informed the Bank that it was in material breach of the MOU, and 2022, the FDIC issued an amended and restated consent order that identified several additional improvements to be made to its BSA/AML program.  The civil monetary penalties were issued after the bank failed to completely remediate the significant and recurring deficiencies that had been identified by the FDIC and NYDFS.  According to the NYDFS, SHBA was also penalized for incorrectly certifying in 2019 and 2020 that it was in compliance with NY AML regulations.

In addition to the monetary penalty, the NYDFS settlement requires SHBA to provide a detailed action plan, acceptable to the NYDFS, that describes the measures it will take to remediate the AML deficiencies identified by the NYDFS in its investigation – an investigation that was coordinated with the FDIC and FinCEN.  SHBA is also required to provide the NYDFS with written updates every six months on its remediation progress and must continue to fully cooperate with New York and federal investigators.

The amount of the civil money penalty imposed by the NYDFS was based on certain factors, including the bank’s repeated compliance failures, its cooperation with investigators and its recent efforts to improve its BSA/AML compliance program, including the adoption of the a more sophisticated transaction monitoring system and increasing its AML staffing.  When determining its civil money penalty amount, FinCEN also considered several enforcement factors, including SHBA’s significant cooperation and responsiveness to requests from the FDIC, NYDFS, and FinCEN; the nature and seriousness of the violations; the pervasiveness of the wrongdoing within the institution; and the fact that the violations were not voluntarily disclosed.

FDIC Press Release | FDIC Order | FinCEN Press Release | FinCEN Consent Order | NYDFS Press Release | NYDFS Consent Order