OCC Issues Cease and Desist Order against Citibank N.A. for Anti-Money Laundering Violations

On April 5, 2012, the Office of the Comptroller of the Currency (OCC) issued a cease and desist order against Citibank, N.A., Sioux Falls, South Dakota, for violating the Bank Secrecy Act (BSA) and its underlying regulations.

The order requires the bank to take comprehensive corrective actions to improve its BSA compliance program.

The OCC found that the bank’s BSA compliance program had deficiencies with respect to internal controls, customer due diligence, the independent BSA and anti-money laundering audit function, monitoring of its remote deposit capture and international cash letter instrument processing in connection with foreign correspondent banking, and suspicious activity reporting related to that monitoring.  These findings resulted in violations by the bank of statutory and regulatory requirements to maintain an adequate BSA compliance program, file suspicious activity reports, and conduct appropriate due diligence on foreign correspondent accounts.

The bank has begun corrective action, and has committed to taking all necessary and appropriate steps to remedy the deficiencies identified by the OCC and to enhance the bank’s BSA compliance program.

The Order states that Citibank self-reported to the OCC that from 2006 through 2010, it failed to adequately monitor its remote deposit capture/international cash letter instrument processing in connection with foreign correspondent banking.  As a result of that inadequate monitoring, Citibank allegedly failed to file timely SARs involving remote deposit capture/international cash letter activity in its foreign correspondent banking business.  Additionally, the Bank's independent BSA/AML audit function allegedly failed to identify systemic deficiencies found by the OCC during the examination process.

The Order requires Citibank's Board of Directors to maintain its Compliance Committee of at least three directors, of which at least two may not be employees or officers of the Bank or any of its subidiaries or affiliates.  The Compliance Committee will be responsible for monitoring and coordinating the Bank's adherence to the provisions of the Order.  The Compliance Committee must meet at least monthly and maintain minutes of its meetings.

The order requires Citibank to "ensure that it has sufficient processes, personnel, and control systems to implement and adhere to this order.  The BSA/AML Action Plan must specify in detail budget outlays and staffing, including aggregated staff compensation information in a format acceptable to the Examiner-in-Charge, that are necessary to achieve and maintain full compliance" with the remedial action required by the Order.  Hence, the OCC seems concerned that Citibank spends sufficient resources.

The Order focuses on the need to strengthen Citibank's customer due diligence, including "specialized or enhanced due diligence for higher risk clients and/or products and services". 

The Order foribids Citibank from entering into "a new high-risk (quantity) line of business, or expand existing high-risk (quantity) lines of business, without conducting a risk assessment, a determination of compliance staffing impact, and without the prior approval of the OCC, which shall be obtained in the form of written supervisory non-objection from the Examiner-in-Charge."

Undoubtedly, in terms of resoruces Citibank could be looking at tens of millions, if not more, in compliance costs (to be controlled by the Compliance Committee) not to mention the millions of lost business because of the prohibitions of Article XI with respect to entering into new products, services, or lines of business.   Because of the size of Citibank, the number of areas of violations, and the drastic remedial action prescribed, the order is likely to send shock waves to the U.S. banking and financial community.


See the Cease and Desist Order http://www.occ.treas.gov/news-issuances/news-releases/2012/nr-occ-2012-5...

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