Regulatory Updates

Federal Reserve Terminates 2013 Money Laundering Enforcement Action against Citigroup Inc.

Over 11 years after issuing an enforcement action against Citigroup, on October 1 the Fed officially terminated its 2013 action. Initially, the action was issued due to a lack of program governance and internal controls to adequately oversee the BSA/AML program. Additionally, the Fed cited that several internal policies were not being adhered to, and Citi was told to develop a Compliance Risk Management Program, complete a BSA/AML Report, and strengthen their BSA/AML controls.

SEC Fiscal Year 2025 Examination Priorities

The SEC has released their examination priorities for 2025, and these include guidance on working with investment advisers and investment firms, self-regulatory organizations, clearing agencies, and other participants, such as transfer agents or security-based swap dealers. Certain risk factors are also identified and considered, such as information security, emerging financial technology, cryptocurrency, regulatory compliance, and money laundering. The opening statement reflects that, should additional risks be discovered throughout the year, the SEC will continue to publish their risk alerts.

U.S. Finalizes Rule to Review More Foreign Land Deals Near Military Bases

The Biden administration finalized a rule to expand the guidelines for reviewing foreign real estate purchases near U.S. military bases. More properties near military bases are being purchased by Chinese-linked organizations and individuals, causing national security concerns. This rule adds almost 60 facilities across 30 states to the review list. This addition means that the jurisdiction of the Committee on Foreign Investment in the United States would increase to 227. The rule will take effect in December.

U.S. Allows Americans to Hold Foreign Conferences with Speakers Under Sanctions

The Biden administration will allow sanctioned speakers, such as members of Hamas and Hezbollah, to present at overseas conferences sponsored by various American organizations. This comes after the Foundation for Global Political Exchange wanted sanctioned Lebanese men to speak in 2022, but OFAC declined to grant a license to allow the men to speak at a journalism conference.

Trump Threatens 100% Tariff on BRICS Countries if They Pursue Creating New Currency

BRICS, the China- and Russia-backed group of emerging economies, may face 100% tariffs, should they create a new currency. President-Elect Trump stated that should any BRICS country create or back a different currency, the tariffs implemented should deter these countries from selling in the United States. Currently, the BRICS countries include Brazil, Russia, India, China, South America, Iran, the UAE, Ethiopia, and Egypt, with 34 additional countries expressing interest in joining.

Enforcement Updates

OCC Issues Cease and Desist Order, Assesses $450 Million Civil Money Penalty, and Imposes Growth Restriction Upon TD Bank, N.A. for BSA/AML Deficiencies

A consent order was released on October 10, 2024, relating to TD Bank’s BSA/AML compliance program deficiencies, specifically related to their risk appetite and abilities to remediate BSA/AML issues in a timely manner that aligns with their growth. The OCC called out deficiencies related to various program elements, including customer due diligence, risk rating, suspicious activity identification and escalation, and independent testing. Because of these deficiencies, which the OCC called “systemic,” hundreds of millions of transactions that required SARs or CTRs were overlooked. The OCC has imposed restrictions on the Bank’s growth, ordered for remediation of program gaps, and imposed a $450 million CMP.

OCC Issues Enforcement Action Against Wells Fargo Bank

On September 12, 2024, the OCC entered into a formal agreement with Wells Fargo after identifying deficiencies within their BSA/AML practices. The gaps span areas relating to transaction monitoring, customer due diligence, and beneficial ownership. While the OCC recognizes that Wells Fargo has begun to take corrective steps, the OCC notes that an Action Plan that details necessary actions to remediate and maintain their BSA/AML program is needed.

Former Swedbank CEO Jailed for "Swindling"

Former Swedbank executive Birgitte Bonnesen was sentenced to 15 months in prison for dishonesty related to Swedbank’s money laundering scandal. In 2019, a Swedish TV broadcaster alleged that the equivalent of $4.4 billion of suspicious transactions from high-risk countries were being funneled to the Baltic countries from Swedbank accounts. She has also been charged with revealing insider information; however, the appeals court determined that the information divulged was “not of specific enough nature to be considered insider trading.”

FinCEN Assesses $900,000 Civil Money Penalty Against Lake Elsinore Hotel and Casino for Violations of the Bank Secrecy Act

On October 23, 2024, a $900,000 penalty was assessed against Lake Elisnore Hotel and Casino for not properly implementing a BSA/AML program. For four and a half years, the casino operated without basic AML controls, creating vulnerabilities in the financial system, according to FinCEN Director Andrea Gacki. In addition to failing to implement a BSA/AML program, they failed to file CTRs and SARs, and did not accurately maintain records. Lake Elisnore will work alongside the California Department of Justice’s Bureau of Gambling Control to mitigate the issues.

U.S. Blacklist Sanctions Evasion Network Tied to Bosnian-Serb Leader Milorad Dodik

In 2022, President Milorad Dodik of Republika Srpska, one of the two entities that make up Bosnia and Herzegovina, was sanctioned for attempting secession. The Biden administration stated that this threatens the Dayton Peace Agreement, which was the agreement that ended the Bosnian War. Dodik was also accused of using his power to get contracts for companies that he and his son Igor oversee. Several entities and individuals under this network have previously been sanctioned.

Crypto Mixer Bitcoin Fog Founder Gets 12.5 Years for Money Laundering

Bitcoin Fog founder Roman Sterlingov was sentenced to 12.5 years in prison for charges of money laundering millions of dollars from illegal websites that sell drugs. Sterlingov mixed up digital currencies to make it harder to find the source of funds, thus allowing for illicit funds to be concealed. Over $400 million was laundered, and Sterlingov was ordered to forfeit $395 million and give up his interest in Bitcoin Fog.

Former BofA Broker Pleads Guilty to Laundering His Father’s Bribe Money

Former Bank of America employee John Polit ran a scheme from 2010 to 2018 in which he was laundering money for his father, Carlos Polit Faggioni, who is Ecuador’s comptroller general. Initially, his job was to tackle fraud and corruption in Ecuador, but instead, he took bribes from Odebrecht, a Brazilian conglomerate. The total money laundered was approximately $16.5 million, and Bank of America is not being held responsible.

Hot Topics

FinCEN Provides Beneficial Ownership Information Reporting Relief to Victims of Recent Natural Disasters

With several hurricanes impacting the United States, FinCEN has announced that some victims of Hurricanes Milton, Helene, Debby, Beryl, and Francine will receive an additional six months to file beneficial ownership information reports. The filing deadline extension applies to companies that have an original reporting deadline one day from the start of the hurricane and ending 90 days after and are located in an area that was designated as an area requiring public assistance or tax filing relief by both FEMA and the IRS.

Global Effort Disrupts Russia-Linked Network Using Crypto to Evade Sanctions, U.S. Charges Two Russians

Two Russian nationals were charged in operating a money laundering scheme that provided access to illicit funds to cybercriminals. The U.S. Department of State has announced a $10 million award to any individual who can assist in their arrest. Websites associated with three illicit exchanges were seized in an effort by the U.S., Netherlands, Latvia, Germany, U.K., and Europol. It is estimated that the total amount flowing through these accounts was approximately $1.4 billion.

TD Worker Fighting Money Laundering Accused of Stealing Data

Daria Sewell, an employee of TD Bank from 2023 to May 2024, was charged with stealing customer information and sharing it over the messaging platform, Telegram. Her phone contained 255 check images and the personal information of nearly 70 individuals, and it included names, addresses, and social security numbers. After sharing the data, Sewell told others to open bank accounts to split the checks among themselves. This is part of an ongoing check fraud investigation within TD Bank, as well as the consent order issued in October.

Former FTX CTO Gary Wang Asks Court for No Jail Time

Gary Wang, former FTX CTO, has asked that he serve no jail time. In 2022, he pled guilty for wire fraud and conspiracies to commit wire, securities, and commodities fraud and will be the fourth executive to be sentenced. Wang’s lawyers believe that his actions are similar to those of Nisad Singh, who was spared jail time after pleading guilty and cooperating with prosecutors. His lawyers continue to state crimes that Singh committed, noting that those of Wang were not as egregious.

Digital ID Trials Test Anonymous KYC for Mainland Chinese in Hong Kong

Companies Flare and Red Date Technology tested a decentralized KYC system that allowed for 200 Chinese nationals in Hong Kong to register for stablecoin services anonymously. Users can sign up and purchase tokenized financial products using HKDA and are later connected to China’s RealD, which allows the platform to confirm users without exposing personal information.

Major Canadian Banks TD and RBC Hold Mortgages for Alleged Toronto Mafia Boss

While TD Bank is dealing with fines from October’s consent order, more evidence has been found related to TD Bank’s involvement with the alleged Canadian mafia boss, Angelo Figliomeni. He opened four mortgages in 2010, which is when he arrived in Canada as a fugitive from Italy. TD Bank has noted that they are in the process of offboarding him and have informed Figliomeni that his mortgages will not be renewed.

This market update was prepared with assistance from Alexandra Barkoske.