The Financial Crimes Enforcement Network and the Office of the Comptroller of the Currency have fined Qatar's Doha Bank - New York branch a $5m civil money penalty. According to FinCEN and the OCC, the bank's branch in Manhattan – USA was engaged in high-risk services accompanied by lack of adequate anti-money laundering controls which led to the failure to report $7.4bn-worth of suspicious transactions in a timely manner. The OCC penalty order (PDF) states that the enforcement action was based on AML "deficiencies and violations" that occurred at the branch during the period between May 2004 and January 2007.
"In Specific, the branch failed to adequately monitor, identify, investigate and report suspicious activities that took place through the branch's funds transfers, demand draft services, pouch activity, and correspondent relationships, and did not undertake adequate audit or perform an independent testing for such activities. In addition, the branch failed to conduct sufficient due diligence on its foreign correspondents," Stated by FinCEN and the OCC stated when announcing the fine.
R. Seetharaman, Doha Bank’s CEO, announced that the penalty refers to failure to implement sufficient programs, policies and procedures to monitor suspicious activities by the branch from May 2004 to Jan 2007. The branch is now in full compliance with all OCC requirements in this regard."
This was not the first time the OCC fined Doha Bank's New York branch for AML failures. The branch was under a formal enforcement action that the OCC issued from 1999 until 2001 for failure to have an effective Bank Secrecy Act compliance program and in ability to to identify and report suspicious activities. In September 2006, the OCC issued a cease-and-desist order (PDF) that barred the branch from processing wire transfers "as intermediary or otherwise" until it "implements adequate internal controls to comply with the [BSA]."
The 2006 order also obliged Doha Bank branch to conduct a transaction review, commonly known as a "look back," to search for any unreported wire transfers suspicious activities, demand drafts, and pouch items it had processed. The look-back, was completed in January 2008, and revealed that the scope of the branch's related AML failures was as serious as regulators had suspected.
"The branch filed 610 late suspicious activity reports involving suspicious transactions totaling approximately $7.4bn," FinCEN's penalty assessment (PDF) states. "Five hundred sixty-four of these late suspicious activity reports, reporting transactions totaling approximately $6.5bn, were filed as a result of the transaction review required under the consent order."
FinCEN'spenalty assessment states that "Doha New York has a client base consisting primarily of correspondent accounts for DohaBank and other foreign financial institutions that do business in countries that include jurisdictions that are classified as a high risk of money laundering and terrorist financing."
FinCEN director James Freis, Jr, seeks this incident to warn financial institutions that the current financial crisis is not an excuse for AML Non-Compliance. "Despite the current economic and resource challenges that many banks may face, BSA compliance efforts must not be diminished," he said. "Timely, complete, and accurate SARs are critical tools available to law enforcement as a means to deter and detect criminal activity."
Comptroller John Dugan added that it is "critically important" that financial institutions have effective SAR mechanisms in place, "especially with regard to higher-risk products and services."