Thursday, December 15, 2016

Defunct Bronx CU Fined $500K by FinCEN

The Financial Crimes Enforcement Network (FinCEN) today assessed a $500,000 civil money penalty against Bethex Federal Credit Union, Bronx, New York for significant violations of the Bank Secrecy Act's anti-money laundering (AML) regulations.

In December 2015, the National Credit Union Administration liquidated Bethex, determining the credit union was insolvent with no prospects of returning to viability. At the time of its liquidation, the credit union had $12.2 million in assets.

FinCEN’s penalty is a claim against any assets that remain after the completion of Bethex’s liquidation. The penalty will not affect the National Credit Union Share Insurance Fund or any other credit union.

Since 2002, Bethex’s AML program maintained internal controls specific for low to moderate-income clientele within its designated field of membership in New York City.

But in 2011, Bethex began providing services to wholesale money-services businesses (MSBs) that were located outside New York and engaged in high-risk activity. It processed transactions for MSBs in more than 30 countries, including Mexico, Ghana, Bangladesh, China and Pakistan, all of which carried high risks for money laundering.

However, Bethex did not update its anti-money laundering programs. As a result, Bethex was unable to adequately monitor, detect, and report suspicious activity or mitigate the associated risks, leaving the credit union particularly vulnerable to money laundering.

The enforcement order found that Bethex was not adequately staffed to handle the volume of MSB transactions.

Bethex failed to timely detect and report suspicious activity to FinCEN and did not file any Suspicious Activity Reports (SARs) from 2008 through 2011. In 2013, as a result of a mandated review of previous transactions, the credit union late-filed 28 SARs. The majority of the suspicious activity involved high-volume, large amount transfers outside of Bethex’s expected customer base by MSBs capable of exploiting Bethex’s AML weaknesses.

Unfortunately, most of those SARs were inadequate and contained short, vague narratives encompassing a broad summary of multiple and unrelated instances of suspicious activity. FinCEN found that these SARs provided little benefit to law enforcement.

Read the FinCEN press release.

Read the enforcement order.

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