Compliance officer BSA case a cautionary tale for small banks

Gyanendra Asre pleaded guilty Wednesday in U.S. District Court for the Eastern District of New York to violating the BSA by failing to maintain an anti-money laundering (AML) program, the DOJ announced in a press release. He is scheduled to be sentenced May 3.

In a parallel action, FinCEN fined Asre $100,000 and banned him from serving at any institution covered by the BSA for five years.

The details: From 2014-16, Asre was a supervisory member of the New York State Employees Federal Credit Union, which served 1,100 New York state public employees and had less than $2 million under management, according to FinCEN. Asre was a certified AML specialist with experience in international banking and trained in AML compliance and procedures. He convinced the credit union’s volunteer-run board that he and his businesses would apply appropriate AML oversight to the new business, as required by the BSA.

Instead, Asre transformed the institution “from a one-branch, not-for-profit credit union with a single common bond field of membership serving New York state employees to a conduit for repatriating bulk cash and checks from Mexico, through [money service businesses] that Asre controlled, without any requisite AML oversight of the underlying transactions,” FinCEN said in its order.

Asre arranged for a company, IBI Armored Car, to convert $150 million in bulk cash from a Mexican bank into electronic deposits, using wire transfers, per the order.

Another company, a money services business called “DDH” that Asre controlled, allowed foreign nationals to deposit money into its account at the credit union. The credit union then facilitated $110 million worth of wire transfers between DDH’s credit union account and another Mexican bank, on behalf of those foreign nationals.

Eventually, more than 99 percent of the credit union’s revenue would be represented in these bulk cash transactions, FinCEN said.

Asre never registered the money services business with FinCEN, as required. The credit union processed the high-risk transactions without ever filing a suspicious activity report (SAR), as required by the BSA, the DOJ said.

Compliance considerations: The BSA mandates banks and credit unions implement and maintain an AML program that includes:

• A system of internal controls to assure ongoing compliance;
• Independent testing for compliance to be conducted by bank personnel or by an outside party;
• Designation of an individual or individuals responsible for coordinating and monitoring day-to-day compliance;
• Training for appropriate personnel; and
• Appropriate risk-based procedures for conducting ongoing customer due diligence, including but not limited to understanding the nature and purpose of customer relationships and identifying and reporting suspicious transactions.

FinCEN said Asre disregarded or ignored the BSA’s requirements. He concluded the credit union operated at a low level of risk “without conducting an adequate risk assessment or providing any supporting documentation or justification,” the agency said.

He failed to establish a risk-based approach for customer onboarding and customer due diligence, FinCEN said.

He created a 40-page training manual for the credit union, after the National Credit Union Administration (NCUA) sent a supervisory letter. But Asre never trained any of the credit union’s employees about their compliance responsibilities regarding the BSA, FinCEN alleged.

Asre and the credit union never filed a SAR with FinCEN, although regulators would later determine the reports should have been filed on $940 million worth of suspicious, high-risk transactions.

In 2017, the NCUA liquidated the credit union, “after determining the credit union was insolvent with no prospect for restoring viable operations on its own.”