WASHINGTON - AmSouth Bancorp. said Tuesday that it had agreed to pay federal authorities $50 million as a result of charges that it committed "systemic and serious" violations of the Bank Secrecy Act and other anti-money-laundering laws.
The $48.2 billion-asset Birmingham, Ala., company will pay $40 million as a result of an investigation by the U.S. Attorney's Office for the Southern District of Mississippi and a $10 million civil money penalty assessed by the Federal Reserve Board and the Financial Crimes Enforcement Network.
AmSouth also said it incurred pretax costs of $4 million in professional and other related fees during the third quarter. It said it was neither admitting nor denying guilt to any of the charges.
It also agreed to a cease-and-desist order from regulators designed to beef up its anti-laundering program. In its 10-page order announcing the civil penalty, Fincen cited problems at AmSouth's main banking unit, including poor internal controls, ineffective automated systems to monitor suspicious activity, and a lack of adequate oversight.
Dunn Lampton, the U.S. Attorney for the Southern District of Mississippi, agreed to defer prosecution for a year while AmSouth complies with its agreements. It said it will not be criminally prosecuted if it meets all its obligations to federal and state authorities.
The crackdown shows that since the start of a recent money-laundering scandal at Riggs National Corp., regulators have stepped up their efforts to find and punish deficiencies at other institutions.
"As this case reflects, if a financial institution fails to establish and implement effectively such programs, we will take appropriate action to ensure compliance," William D. Langford Jr., the associate director of Fincen's regulatory policy and programs division, said in a news release.
C. Dowd Ritter, AmSouth's chairman and chief executive, said in a press release, "We have already taken a number of remedial actions, and are committed to taking further actions, to ensure we are appropriately responding to the bank's obligations."
The charges stem from an investigation into a Ponzi scheme allegedly devised by Louis Hamric, a lawyer, and Victor Nance, who was a registered representative for Mony Securities Corp. When the two defaulted in 2002, they owed $15 million to about 50 investors. Fincen referred to that case in its order, which said AmSouth ignored several red flags about the scheme, including concerns raised by its own employees, and failed to file a suspicious activity report until two years after it should have been aware of the case.
Fincen also cited other examples where it said AmSouth did not report activity it knew or should have known was suspicious. In part, it blamed AmSouth's poor training for the failure to file SARs.
Also, AmSouth failed to conduct a proper risk assessment of its customer base to identify high-risk customers, products, and geographic locations, Fincen said.
Under the cease-and-desist order from the Fed and Mississippi state regulators, AmSouth must revise its procedures in 30 days for how it responds to regulatory concerns. It also must hire an independent consultant to go through its transaction and account activity since Sept. 1, 2001, and measure how it identified and reported suspicious activity. Another consultant must review its anti-laundering program and propose immediate changes.
Meanwhile, federal regulators are continuing to crack down on compliance by U.S. subsidiaries of foreign banks.
Standard Chartered PLC and the New York branch of its Standard Chartered Bank have signed an agreement with the Fed and the New York State Banking Department to improve anti-laundering compliance. According to the agreement, released Friday, Standard Chartered will take steps to address deficiencies related to compliance with the Bank Secrecy Act and suspicious activity reporting requirements.
