Thursday, August 2, 2018

Peter Hardy Post on Reckless Conduct for BSA Civil Penalties (8/2/18)

Peter Hardy, here, has the great posting:  The BSA Civil Penalty Regime: Reckless Conduct Can Produce “Willful” Penalties (Money Laundering Watch 8/1/18), here.  Peter discusses the developments in the FBAR civil willfulness penalty context (often discussed on this blog) but says
[T]he point of this post is that the case law now being made in the FBAR and offshore account context will have direct application to more traditional Anti-Money Laundering (“AML”)/BSA enforcement actions, because the civil penalty statute being interpreted in the FBAR cases is the same provision which applies to claimed failures to maintain an adequate AML program and other violations of the BSA.  Thus, the target audience of this post is not people involved in undisclosed offshore bank account cases, but rather people involved in day-to-day AML compliance for financial institutions, who may not realize that some missteps may be branded as “willful” and entail very serious monetary penalties, even if they were done without actual knowledge.  This may be news to some, and it underscores in particular the risks presented by one the topics that this blog frequently has discussed: the potential AML liability of individuals.
Peter has good discussions of the Markus and Norman cases I have discussed on the blog.   Peter concludes:
When pursuing a civil or criminal enforcement action involving any kind of statute with a relatively low mental statement requirement (the classic examples are statutes involving public safety, such as regulations pertaining to the U.S. Food and Drug Administration), the government often will argue that, regardless of the thin statutory requirements, the facts at hand demonstrate actual knowledge and some sort of nefarious conduct. That may well be true in particular cases, and it should give comfort to AML professionals to the extent that it is true, because it suggests that the government will not pursue “willful” penalties unless the actual facts are sufficiently egregious and such a penalty is deserved (in the view of the government).  Nonetheless, AML requirements sometimes can be as amorphous as they are sprawling. As the FBAR cases reflect, the BSA presents the real-world possibility that severe civil penalties can be imposed in the absence of actual subjective knowledge.  This is a potentially sobering reminder to financial institutions and their Boards, executives, compliance officers and shareholders.
I do note that I link Peter's  Money Laundering Watch Blog on the right side of this blog, so readers having an interest can access it by clicking there or creating their own bookmark for his blog.

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