California Bank Fined $31 Million for Skimping on Anti-Money Laundering Campaign

Union Bank of California, N.A., which is a wholly-owned subsidiary of UnionBanCal Corporation and based in San Francisco, has agreed to enter into a deferred prosecution agreement relating to charges of failing to maintain an effective anti-money laundering program. They will have to forfeit $21.6 million to the federal government.

If the bank fully implements proper anti-money laundering measures as required in their agreement, the charges will be dropped in 12 months.

There are going to be additional penalties assessed against the bank by The Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of the Currency (OCC). Each of these has assessed an additional $10 million civil money penalty, but the FinCEN penalty will be satisfied by the $10 million payment to the OCC, making the total payment $31.6 million.

The charges came about because of transactions conducted between May 2003 and April 2004 involving accounts at the bank that were in the name of Mexican currency exchange houses. Undercover operations by the U.S. and other governments document the export of multi ton shipments of
cocaine from Colombia to Mexico, with the final destination of the drugs the U.S. and Europe. Investigators then were able to trace the flow of the money from the drugs in the form of bulk shipments of both U.S. dollars and euros to a few of the Mexican currency exchanges, who were working together, or were direct deposited to accounts held by the exchanges in Spain. In both cases, the money was eventually wire transferred or were first converted into other negotiable instruments and ended up in the accounts in California. The bank failed to detect, identify and report the transactions as is required by the Bank Secrecy Act.