On February 27, 2017, the Office of the Comptroller of the Currency (OCC) issued a Consent Order to Merchants Bank of California, N.A. This Order included an Order for a Civil Money Penalty of $1 million.
This Consent Order is the third from the OCC to Merchants Bank since 2010. In 2010, 2014, and now, the consent orders centered on deficiencies in the Bank Secrecy Act (BSA) compliance program. These deficiencies were concentrated in the Bank’s failure to develop and maintain an effective program for identifying and monitoring transactions that pose “greater than normal risk”. More specifically, the OCC found that the Bank failed with respect to implementing enhanced account opening procedures for higher risk accounts; monitoring suspicious cash, monetary instruments, wire transfers, and other activities; and in maintaining an “integrated, accurate system for all Bank areas to produce periodic [BSA compliance] reports”.
On the same day, the Financial Crimes Enforcement Network (FinCEN) fined Merchants Bank $7 million for impeding compliance staff and threatening to fire staffers who wouldn’t process suspicious transactions.
Merchants’ leadership impeded [AML] analysts and other employees from investigating activity on transactions associated with accounts that were affiliated with Bank executives, and the activity in these accounts went unreported for many years. In a three-month period, Merchants processed a combined $192 million in high-risk wire transfers through some of these accounts.
FinCEN Acting Director Jamal El-Hindi said Merchants Bank was an “institution run by insiders essentially to provide banking services to money services businesses that the insiders owned.”