Chile’s Banco de Chile Faces $3 Million Penalty for Bank Secrecy Act Violations in U.S. Branches
The Financial Crimes Enforcement Network (FinCEN) announced that Banco de Chile, a Chilean public holding company and banking institution, will pay a civil money penalty of $3 million for violating the Bank Secrecy Act (BSA) and related regulations in its New York and Miami branches.
About Banco de Chile
- Headquartered in Santiago, Chile
- Operates approximately 240 branches in Chile
- Offices in Hong Kong, Brazil, Argentina, and Mexico
- Total assets: over $15.8 billion
- Provides commercial banking services to a broad customer base
- New York and Miami branches subject to regulatory oversight by the OCC and the Federal Reserve Board, respectively
Violations of Bank Secrecy Act (BSA) regulations
According to FinCEN, Banco de Chile’s New York and Miami branches failed to establish and maintain adequate internal control systems and failed to designate an individual or individuals to ensure compliance with the Bank Secrecy Act. The branches also failed to conduct adequate independent testing for BSA compliance.
Failure to report suspicious activity
As a result, the branches were unable to identify, monitor, and report suspicious activity related to a prominent Chilean politically exposed person and their associates, starting from at least November 1997.
- New York branch received a Consent Order from the OCC on February 1, 2005, due to deficiencies in the BSA anti-money laundering program and recordkeeping requirements
- Miami branch received a Cease and Desist Order from the Federal Reserve on February 2, 2005, addressing the deficiencies in its anti-money laundering program, particularly concerning policies and procedures for customer due diligence, identifying and reporting suspicious activity, and risk management associated with high-risk customer accounts
Significance of the violations
Banco de Chile’s New York and Miami branches acted as gateways for the bank’s customers to access the U.S. financial system. The branches offered services such as trade financing, extended credit, and deposit, transactional, and retail banking services to Banco de Chile’s customers, and were required to implement and maintain an anti-money laundering program as they were financial institutions and banks under the BSA and its implementing regulations.
Conclusion
The $3 million civil money penalty from the regulatory agencies comes from their findings that the deficiencies in Banco de Chile’s anti-money laundering programs at its New York and Miami branches contributed to the failure to comply with the BSA and related regulations. Banco de Chile signed a consent to the assessment without admitting or denying the facts or determinations made by FinCEN, except for jurisdiction. The consent resolves the matter related to the violations of the BSA and related regulations.