1 CIVIL AND CRIMINAL PENALTIES FOR MONEY LAUNDERING AND BSA VIOLATIONS  Money Laundering 20 years in prison $500,000 fine Forfeiture of property including bank accounts  Willful Violation of the BSA by bank employee 5 years in prison $250,000 fine  A Bank Violating certain provisions of BSA $1M or twice the value of the transaction

2 REPERCUSSIONS OF FAILING TO COMPLY WITH THE BSA AND AML LAWS  Regulatory enforcement actions  Severe monetary penalties  Criminal indictment of banks and bankers  Forfeiture of funds  Personal responsibility of Management and Board of Directors  Reputational Damage  Death Penalty = Cancellation of banking license

3 REGULATORY ENFORCEMENT ACTIONS  27 Cease and Desist Orders  Penalties = $10,500 - $25M

4 SEVERE MONETARY PENALTIES  Doha Bank, NY Branch April 2009 $5M No SAR monitoring/reporting/no indep. testing Failed to conduct DD on foreign correspondents  United Bank for Africa, New York April 2008 $15 CMP Previous C&D and CMP

5 CRIMINAL INDICTMENT  Bank of New York 1999 Lucy Edwards, Vice President $7B laundered through accounts from Russia 5 yrs sentence – 6 months house arrest BoNY - $12M comp damages; $26M fine

6 FORFEITURE OF FUNDS  Sigue Corporation (MSB) Jan $15M CMP/Forfeiture U/C Operation – Drug Money Laundering  Union Bank Sept $10CMP/$21.6M Forfeiture Failed to comply with MOU, failed to file SARs, inadequate training, ineffective oversight

7 PERSONAL RESPONSIBILITY/REPUTATIONAL DAMAGE Sykesville Federal Savings Assoc. Feb $10.5K CMP o Chairman - $2,000 o Director and Former Pres. - $1,500 o 7 Directors and Former Directors - $1,000 President Removed Failed to comply with previous C&D

8 Common Deficiencies Causing Enforcement Actions 1.Inadequate BSA/AML Program (policy, procedures and systems) 2.Inadequate BSA/AML Compliance Staff/Inadequate Resources 3.Lack of BSA/AML Compliance Committee 4.Inadequate Senior Mgmt/Board of Director Oversight 5.Inadequate CDD/KYC 6.Deficient SAR reporting 7.Inadequate training 8.Inadequate independent testing 9.Failure to maintain accurate and complete books/records 10.Failure to correct previously identified BSA/AML

9 How to Fix Deficiencies  Address Deficiencies listed in Internal and External Exams  Corrective Plan addressing Specific Deficiencies and Systemic Issues  Frequent Communication with Examiners  Document Action Taken/Results  Throwing money and people at the problem is not adequate

10 WHAT IF PENALTY TRAIN IS HEADING DOWN TRACKS?  Notify Superiors/Board of Directors  Engage Corporate Counsel  Consider outside consultant/counsel  Damage Control  Document, document, document