Shinhan Bank America fined $25M for repeat AML compliance failures

Shinhan Bank America was fined $15 million by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) for willfully violating the BSA by failing to implement and maintain an effective AML program and neglecting to timely report hundreds of transactions involving suspicious financial activity by its customers, the agency announced in a press release Friday. As part of its action, FinCEN credited a $5 million penalty levied by the Federal Deposit Insurance Corporation (FDIC) regarding its related findings.

Separately, the New York State Department of Financial Services (NYDFS) fined Shinhan Bank America $10 million as its state regulator.

The details: From April 2016 through March 2021, Shinhan Bank America’s AML program wasn’t reasonably designed to prevent money laundering. Areas of weakness included customer due diligence and risk rating, transaction monitoring, and suspicious activity alerts, according to FinCEN’s order.

“As a result, tens of millions of dollars in suspicious transactions were not reported to FinCEN in a timely manner, including transactions connected to tax evasion, public corruption, money laundering, and other financial crimes,” the agency said.

Starting in 2015, the bank was made aware by regulators regarding its BSA violations. Shinhan Bank America agreed to a consent order with the FDIC in 2017 requiring corrective action, and the regulator issued additional mandates for the bank to meet as part of an amended order in 2022.

Meanwhile, the bank entered a memorandum of understanding with the NYDFS in 2020 regarding weaknesses in its AML compliance program and internal audit function.

“Despite regulatory actions from the department and federal financial regulators, Shinhan Bank America failed to address substantial compliance deficiencies,” said NYDFS Superintendent Adrienne Harris in the agency’s release. “Ensuring that banks operating in New York have strong BSA/AML compliance programs is essential to maintaining the integrity of the financial markets and preventing bad actors from abusing the system for illegal means.”

Compliance considerations: Shinhan Bank America was lauded for cooperating with FinCEN, the FDIC, and the NYDFS, including by conducting lookback reviews required by its previous consent orders and providing status updates, progress reports, and briefings.

The bank’s settlement with the NYDFS requires it to create a written plan detailing enhancements to its compliance policies and procedures, suspicious activity monitoring and reporting, and customer due diligence requirements.

Bank response: “These consent orders are focused on past shortcomings in the bank’s AML compliance program and do not reflect the state of the bank’s current program,” Shinhan Bank America said in a Q&A regarding the resolutions. “The bank has made significant improvements in its AML program and systems.”

The bank noted the consent orders do not involve any allegation it committed sanctions or money laundering violations.