Tag: AML

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TD Bank: Part 3 – Lessons Learned for Compliance

We continue our exploration of the resolution of the AML/BSA enforcement action involving the TD Bank US (the Bank) wholly owned by the TD Bank Group,  a publicly traded (NYSE: TD) international banking and financial services corporation headquartered in Toronto, Canada. Today, we explore some key lessons learned for the AML compliance professional. We begin with what Attorney Merrick Garland noted: “Three money laundering networks took advantage of TD Bank’s failed anti-money laundering system.”

The 3 Money-Laundering Scheme

The David Scheme

Da Ying Sze, also known as David, used the Bank as a money laundering and unlicensed money transmitting scheme for which he pled guilty in 2022. David conspired to launder and transmit over $653 million, with more than $470 million laundered through TDBNA. He bribed bank employees with over $57,000 in gift cards to facilitate the scheme. David laundered money by depositing large amounts of cash, sometimes exceeding $1 million in a single day, into accounts opened by other individuals. He also instructed bank employees to send wires and issue official checks. The Bank needed to correctly identify David as the person conducting the transactions in over 500 CTRs, which covered more than $400 million in transaction value, despite David directly depositing large cash sums into accounts he allegedly did not control.

Bank Insiders

Five Bank employees provided material assistance to a second money laundering scheme, which laundered millions of dollars from the United States to Colombia. The five individuals, referred to as “TDBNA Insiders,” held various positions within the bank, including Financial Service Representative, Retail Banker, Assistant Store Manager, and Store Supervisor at TDBNA stores in New Jersey and Florida. These insiders helped the money laundering networks by opening accounts and providing dozens of ATM cards used to launder funds through high-volume ATM withdrawals. They also assisted in maintaining these accounts by issuing new ATM cards and overcoming internal controls and freezes on account activity. Through these actions, approximately $39 million was laundered through the bank. Despite significant internal red flags, TDBNA did not identify the insiders’ involvement in the money laundering scheme until law enforcement arrested Insider-1 in October 2023.

Shell Company Scammers

From March 2021 through March 2023, a money laundering organization known as “MLO-1,” which claimed to be involved in the wholesale diamond, gold, and jewelry business, maintained accounts for at least five shell companies at the Bank. These accounts moved approximately $123 million in illicit funds through the bank. The Bank knew these shell companies were connected, sharing the same account signatories. Despite these red flags, The Bank did not file a Suspicious Activity Report (SAR) on MLO-1 until law enforcement notified the bank in April 2022. By then, MLO-1’s accounts had been open for over 13 months and had transferred nearly $120 million through TDBNA.

Lessons Learned

This enforcement action is a sobering reminder of compliance’s critical role in preventing and detecting financial crimes like money laundering. With over $470 million laundered in one scheme, $39 million moved through insiders, and $123 million transferred via shell companies, significant compliance failures occurred.  Of course, these are only a part of the $18.3 trillion in transactions that the Bank does not monitor due to its conscious compliance failures. These incidents underscore the importance of maintaining robust internal controls, employee oversight, and proper reporting mechanisms.

Failing to Detect Obvious Red Flags

In this case, one of the most glaring issues is the bank’s failure to identify the obvious red flags associated with laundering large sums of money. In the case of David, the Bank failed to file accurate CTRs for over $400 million in transactions. David regularly deposited enormous amounts of cash, over $1 million in a single day, into accounts opened by others, yet the bank failed to link him to these transactions.

The key takeaway for compliance professionals is to ensure that their systems are calibrated to flag suspicious activities, especially when transactions exceed certain thresholds. Large cash deposits, frequent activity involving multiple accounts, and nominee account holders should always trigger enhanced due diligence and review. Automated systems must be updated and combined with human oversight to catch these patterns.

The Role of Corrupt Employees in Facilitating Money Laundering

The involvement of the Bank Insiders in the second laundering scheme is a textbook example of how internal corruption can undermine even the most sophisticated compliance programs. These employees assisted money laundering networks by opening accounts, providing ATM cards, and circumventing internal controls and account freezes. In exchange, they received bribes, showing the vulnerability of staff in critical roles.

This scenario mandates why employees must undergo regular anti-bribery and anti-corruption training to reinforce the consequences of accepting bribes and engaging in unethical behavior. In addition, a strong compliance culture should include mechanisms for detecting internal misconduct, such as anonymous reporting systems and independent audits to identify corrupt employees early. Creating ethical guardrails within your organization, alongside frequent checks and balances, can protect against insider threats.

CTRs and SARs Must be a Priority

A key regulatory requirement under the Bank Secrecy Act (BSA) is the filing of Currency Transaction Reports (CTRs) and Suspicious Activity Reports (SARs). The Bank’s failure to file accurate CTRs in David’s case and delayed filing of SARs in the Shell Company Scammers scheme underscores how devastating the consequences can be when compliance teams do not take their regulatory obligations seriously. Even after identifying that shell companies were linked to each other by shared account signatories, the Bank failed to act quickly, allowing nearly $120 million to be laundered through their systems.

The timely filing of CTRs and SARs is not just a best practice; it is a regulatory requirement. Compliance officers must ensure that processes for flagging suspicious activity are effective and swift. Training staff to recognize when CTRs and SARs are needed and implementing systems that automatically flag transactions for review will help ensure compliance with reporting obligations.

Third-Party Risk and Shell Companies: Know Your Customer (KYC) Failures

The shell companies used to launder $123 million demonstrate a significant lapse in the bank’s Know Your Customer (KYC) protocols. The Bank knew the shell companies were linked by the same account signatories yet failed to act for over a year. This gap in KYC enforcement allowed significant funds to pass through without appropriate scrutiny or action.

KYC processes should be foundational to every compliance program. Regular reviews and enhanced due diligence are required when dealing with high-risk entities like shell companies. Compliance professionals should prioritize the identification of ultimate beneficial ownership (UBO) and remain vigilant when patterns suggest potential fraud, even if account openings appear legitimate at first glance. Your KYC protocols must also integrate ongoing monitoring, not just one-time checks.

The Consequences of Ignoring Red Flags

Across all three schemes, the Bank ignored significant internal red flags—whether employees directly deposited large sums of cash, insiders actively assisting in laundering activities, or shell companies linked by shared signatories. Compliance must be more than just a checkbox exercise. Red flags must be taken seriously and escalated quickly to prevent further damage.

Compliance teams must be empowered to act decisively when red flags are raised. This includes having the authority to freeze accounts, file reports, and escalate issues to senior management and regulatory authorities when needed. Additionally, a strong culture of compliance, backed by leadership, should encourage immediate action when suspicious activity is detected.

Monitoring and Auditing: Preventing Future Failures

Finally, this case reveals the importance of ongoing monitoring and regular auditing. In all three schemes, the Bank failed to sufficiently monitor account activities and employees, which allowed the laundering schemes to continue for extended periods. Regular audits and automated transaction monitoring systems are essential to detect and prevent similar issues.

Auditing and monitoring systems should be built into your compliance framework, focusing on high-risk accounts, employees, and geographies. By continuously reviewing and auditing compliance processes, teams can identify gaps early and prevent further exploitation. Technology can be key in monitoring, but human oversight is critical to analyzing more complex behavior patterns.

This enforcement action is a stark reminder of the consequences of weak compliance controls, employee corruption, and failure to act on red flags. For compliance professionals, the lessons from this case are clear: robust internal controls, continuous training, effective KYC procedures, and timely reporting are essential to preventing and detecting money laundering. By learning from these failures, compliance officers can strengthen their programs and ensure their organizations remain vigilant in the fight against financial crime.

I will explore this matter in depth over the next several blog posts. Tomorrow, I will consider the Bank’s culture and flat cost paradigm.

Resources

OCC

OCC Press Release

Consent Order 

Civil Money Penalty 

DOJ

TD Bank US Holding Company Information

TD Bank N.A. Information

TD Bank US Holding Company Plea Agreement and Attachments

TD Bank N.A. Plea Agreement and Attachments

Merrick Garland Remarks

Nicole Argentieri Remarks

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Compliance Into the Weeds

Compliance into the Weeds: Adventures in Squeezing Out Compliance – TD Bank’s Flat Cost Paradigm

The award-winning Compliance into the Weeds is the only weekly podcast which takes a deep dive into a compliance related topic, literally going into the weeds to more fully explore a subject. Looking for some hard-hitting insights on compliance? Look no further than Compliance into the Weeds!

In this episode, Tom Fox and Matt Kelly take a deep dive into the TD Bank BSA and AML enforcement action, which led to $3 billion in fines and penalties.

Tom and Matt discuss TD Bank’s conscious strategy of not raising the budget, known as the Flat Cost Paradigm or Zero Expense Growth Paradigm, and how this strategy severely restricted the Bank’s compliance and AML functions. This tactic aimed to increase profits by keeping expenditures flat year after year. The impact of this strategy is particularly evident in the global AML team’s expenditures on the U.S. anti-money laundering program, which decreased in 2021 compared to 2018. Despite significantly growing U.S. assets and net income, the bank refrained from increasing its budget for essential programs, a fact highlighted in the Justice Department indictment. The Bank’s strategy serves as a clear warning about the dangers of prioritizing profits over compliance.

Key Highlights:

  • Introduction to the Flat Cost Paradigm
  • Details of the Budget Strategy
  • Impact on Anti-Money Laundering Efforts
  • Financial Growth Amidst Budget Constraints

Resources:

  1. Blogs

Matt in Radical Compliance

Tom in the FCPA Compliance and Ethics Blog

  1. Tom

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  1. Enforcement Related Material

OCC

OCC Press Release

Consent Order 

Civil Money Penalty 

 DOJ

TD Bank US Holding Company Information

TD Bank N.A. Information

TD Bank US Holding Company Plea Agreement and Attachments

TD Bank N.A. Plea Agreement and Attachments

Merrick Garland Remarks

Nicole Argentieri Remarks

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Blog

TD Bank: Part 2 – When Profits Trump Compliance: A Recipe for Corporate Disaster

We continue our exploration of the resolution of the AML/BSA enforcement action involving TD Bank US (the Bank), which is wholly owned by TD Bank Group, a publicly traded (NYSE: TD) international banking and financial services corporation headquartered in Toronto, Canada. TD Bank Group is one of the thirty largest banks in the world and the second-largest bank in Canada.

The enforcement action came in with a $3 billion penalty against the Bank, which has pled guilty to charges relating to the Bank Secrecy Act (BSA), which requires financial institutions to maintain programs to detect and report suspicious activity by their customers. The Bank also settled a series of civil investigations by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), the Federal Reserve, and the Office of the Comptroller of the Currency (OCC), which mandated a Monitor to oversee the building out of the Bank’s compliance program and imposed an asset cap limiting the growth of the Bank’s U.S. retail business as a result of the breakdown of its controls.

This TD Bank case is right up there with Siemens, Petrobras, Odebrecht, Goldman Sachs, and Volkswagen as some of the most basic violations of corporate law we have ever seen. All of the above cases involved bribery and fraud, and the Bank case involved a violation of the most basic requirement of the BSA and the most basic tenets of an anti-money laundering compliance program. Moreover, the Bank’s conduct was not 20 years ago or even 10 years ago, as the conduct began in 2018, and the illegal conduct was right up to this past year. What led to these failures?

Failures at the Top

For the Bank, it all started at the top, where the very senior executives at the Bank decreed that no additional funds would be made available for compliance, compliance updates, or new technological solutions designed to make fulfillment of compliance obligations more efficient. This funding strangulation was termed the “flat cost paradigm” across the Bank’s operations. As a result, the Bank “willfully failed to remediate persistent, pervasive, and known deficiencies in its AML program, including (a) failing to substantively update its transaction monitoring system, which is used to detect illicit and suspicious transactions through the Bank, between 2014 and 2022 despite rapid growth in the volume and risks of the Bank’s business and repeated warnings about the outdated system.”

According to the TD Bank US Holding Company Information, this policy was pursued by the Bank Audit Committee and by the Bank’s Chief Anti-Money Laundering Officer during the relevant period, and the Bank’s BSA Officer both knew there were long-term, pervasive, and systemic deficiencies in the Defendants’ U.S. AML policies, procedures, and controls. This led to the Bank monitoring only approximately 8% of the volume of transactions because it omitted all domestic automated clearinghouse transactions, most check activity, and numerous other transaction types from its automated transaction monitoring system. Due to this failure, the Bank did not monitor approximately $18.3 trillion of transactions between January 1, 2018, through April 12, 2024.

It is not as if the Board of the Bank and its Canadian overlords were unaware of these deficiencies. As far back as 2013, FinCEN and the OCC brought enforcement actions against the Bank for its failures in its AML program. The Bank’s Board of Directors specifically signed off on the resolution of this enforcement action. IN 2018, the OCC characterized the Bank’s “planning, delivery, and execution of AML technology systems and solutions as insufficient. Specifically, the OCC highlighted the delays in implementing multiple AML technology projects and found those delays to be directly linked to nearly all of TDBNA’s outstanding AML program issues.”

Internal Audits at the bank also identified specific deficiencies in the bank’s AML and BSA compliance programs. In 2018, Internal Audit determined that the Bank’s high-risk jurisdiction transaction monitoring scenarios were using an outdated list of high-risk jurisdictions, meaning the bank’s scenarios were not designed to generate alerts on the jurisdictions currently deemed to be high-risk. Again, in 2020, Internal Audit identified AML compliance deficiencies related to the governance and review of transaction monitoring scenarios.

External third-party consultants also identified deficiencies in the Bank’s AML/BSA programs. One consultant “commented that “increased volumes and regulatory requirements” would pressure AML operations to meet demands and deadlines. The same consultant concluded that the Bank’s required testing of its transaction monitoring scenarios— which assessed whether scenarios were adequately capturing suspicious activity— took twice as long as the industry average.” A second consultant noted the Bank had “sub-optimal [transaction monitoring] scenarios” due, in part, to “outdated parameters” that generated a large volume of alerts that limited the Bank’s ability to focus on high-risk customers and transactions.” Finally, a third consultant “identified numerous limitations in the Bank’s transaction monitoring program, including technology barriers to developing new scenarios or adding new parameters to existing scenarios.”

Knowledge at the Bottom

Perhaps the craziest thing about the Bank’s failures in AML/BSA was that everyone was in on the joke: the Board, senior management, Bank employees, and ‘the bad guys.’ One conversation went like this:

AML Technologist: what do the bad guys have to say about us Lol

AML Manager: Easy target

AML Technologist:  damnit

AML Manager: Old scenarios; old CRR; tech agility is poor to react to changes

AML Manager: Bottomline: we have not had a single new scenario added since we first implemented the SAS

Another example cited in the Information was the following: “Other employees, both in AML and retail, consistently commented on the Bank’s instant messaging platform about the Bank’s motto, “America’s Most Convenient Bank,” and directly linked it to the Bank’s approach to AML. For example, a US-AML employee noted that a reason the Bank had not stopped one of the below-referenced money laundering typologies was because “we r the most convenient bank lol.”

Finally, this example from the information section states that “employees at multiple levels understood and acknowledged the likely illegality of David’s activity. In August 2020, one TDBNA store manager emailed another store manager and remarked, “You guys need to shut this down, LOL.” In late 2020, another store manager implored his supervisors (several TDBNA regional managers) to act, noting that “[i]t is getting out of hand, and my tellers are at the point that they don’t feel comfortable handling these transactions.” In February 2021, one TDBNA store employee saw that David’s Network had purchased more than $1 million in official bank checks with cash in a single day and asked, “How is that not money laundering,” to which a back-office employee responded, “oh it 100% is.” “

In his remarks, Attorney General Merrick Garland cited three examples where Bank employees knew money laundering was ongoing.

  1. In February 2021, one TD Bank store employee saw that David’s network had purchased over $1 million in official bank checks with cash in a single day. The employee asked, “How is that not money laundering?” A back-office employee responded, “Oh, it 100% is.”
  2. In a second, separate money laundering scheme, five TD Bank employees conspired with criminal organizations to open and maintain accounts at the bank that were used to launder $39 million to Colombia, including drug proceeds.
  3. In yet a third scheme, a money laundering network maintained accounts at TD Bank for at least five shell companies. It used those accounts to move over $100 million in illicit funds through the bank.

The bottom line is that everyone knows that the Bank facilitated money laundering and BSA violations. Why? The Bank consciously decided not to fund the compliance function or pay for any upgrades or updates, all in the name of its ‘flat cost paradigm.’

I will explore this matter in some depth over the next several blog posts. Tomorrow, I will consider money-laundering schemes.

Resources

 OCC

OCC Press Release

Consent Order 

Civil Money Penalty 

DOJ

TD Bank US Holding Company Information

TD Bank N.A. Information

TD Bank US Holding Company Plea Agreement and Attachments

TD Bank N.A. Plea Agreement and Attachments

Merrick Garland Remarks

Nicole Argentieri Remarks

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Blog

TD Bank: Part 1 – Money Laundering and the China Syndrome

Last week, representatives of the US government announced one of the largest sets of fines and penalties for failures in anti-money laundering ever laid down. It involved TD Bank N.A. and TD Bank US Holding Company. It was over $3 billion in fines and penalties with a restriction in growth until the company gets its compliance act together. However, it is not the fine nor creative penalty that flags this matter but the underlying facts and raw brazen-ness of the 10th largest bank in the United States to either actively engage in an ongoing criminal enterprise or to willfully disregard specific evidence of criminal activity and failure of basic compliance which makes this enforcement action stand out. Employees from the front-line tellers who took in millions of dollars in cash, right up to the Board of Directors, knew the bank’s conduct was illegal or buried their collective heads so far down into the sand that they could have caused the China Syndrome to self-execute.

The regulators and enforcers in this sordid tale include the Department of Justice (DOJ), the Board of Governors of the Federal Reserve Board (FRB), the Treasury Department’s Office of the Comptroller of the Currency (OCC), and Financial Crimes Enforcement Network (FinCEN). According to a DOJ Press Release, TD Bank N.A. (TDBNA) and its parent company TD Bank US Holding Company (TDBUSH) (together with TDBNA, the Bank) pled guilty today. They agreed to pay over $1.8 billion in penalties to resolve the Department of Justice’s (DOJ) investigation into violations of the Bank Secrecy Act (BSA) and money laundering. Finally, TD Bank’s guilty pleas are part of a coordinated resolution with the FRB, the OCC, and FinCEN. With the additional fines and penalties due to these entities, the total fine and penalty is over $3 billion.

TDBNA pled guilty to conspiring to fail to maintain an anti-money laundering (AML) program that complies with the BSA, failing to file accurate Currency Transaction Reports (CTRs), and money laundering. TDBUSH pleaded guilty to causing TDBNA to fail to maintain an AML program that complies with the BSA and to fail to file accurate CTRs.

To add to all the above, the government put a restriction on TD’s growth until it fully remediates its compliance program because, as noted by Matt Kelly in Radical Compliance,  it specified that “TDBNA’s total assets cannot exceed $434 billion without OCC approval, and that approval will not come until TDBNA completes an extensive transformation of its AML compliance program.” Further, Kelly noted that if “TDBNA does not make progress on those compliance program reforms in a timely manner, OCC can reduce that asset cap by another 7 percent, and keep going until TD gets its compliance act together. In other words, the longer TD drags its feet on implementing compliance reforms, the tighter the leash around its neck will get.”

How did the Bank get to this point, what can it do to resolve this mess, and what are the lessons learned for the compliance professional, corporate executive, and Board of Directors? Additionally, what is the point of punishment? Will foreign entities always come to the US, open branches, and engage in illegal activities, all in the scramble for the all-mighty dollar? Will corporate executives ever be held liable for intentionally looking the other way or burying their heads in the sand? Several blog posts will explore the answers to these questions and more.

What They Said-Merrick Garland

In a rare appearance by Attorney General Merrick Garland to announce the guilty plea, fine, and penalty, he stated, “Today, TD Bank pled guilty to multiple felonies, including conspiring to violate the Bank Secrecy Act and commit money laundering. TD Bank has also agreed to a $1.8 billion criminal penalty. Combined with civil enforcement actions announced today by other agencies, the United States will impose a total [penalty] of approximately $3 billion against TD Bank. TD Bank created an environment that allowed financial crime to flourish. By making its services convenient for criminals, it became one.

Today, TD Bank became the largest bank in U.S. history to plead guilty to Bank Secrecy Act program failures and the first U.S. bank to plead guilty to conspiracy to commit money laundering. This is also the largest-ever penalty under the Bank Secrecy Act and the first time the Justice Department has assessed a daily fine against a bank. As part of the plea agreement, TD Bank will fundamentally restructure its corporate compliance program at its U.S.-based bank, the 10th largest in the United States. The bank has also agreed to impose a three-year monitorship and a five-year term of probation. While the bank has started its remediation, it will continue to remediate and improve its anti-money laundering compliance program to ensure that it operates lawfully and safely.”

What They Said-Lisa Argentieri

Deputy Assistant Attorney General Nicole M. Argentieri said, “Over the course of a decade, TD Bank placed profits over compliance, prioritizing a “flat cost paradigm” that limited spending across the bank — including on the bank’s anti-money laundering (AML) compliance program, despite growing risks — even while profits soared. The bank knew it had pervasive and systemic deficiencies in its AML program, including a transaction monitoring system that remained stagnant over 10 years despite warnings from regulators, consultants, and even its employees. AML employees joked that the Bank’s failed AML system made TD an “easy target” and a “convenient” bank for bad actors. And they were right. TD’s failed AML compliance program created vulnerabilities that criminals — including TD’s employees — used to launder money through the Bank. All told, three large money laundering networks, two prosecuted by our partners in the District of New Jersey and the third prosecuted in the District of Puerto Rico, laundered over $670 million through TD.

Notably, the Bank did not self-disclose any regulator. Yet after the Bank was notified of the investigation into its conduct, “the Bank provided strong cooperation. For example, TD identified additional misconduct and provided evidence of that misconduct to the department. Some of that evidence helped advance our investigation of individuals, including video surveillance footage TD provided after reviewing hundreds of hours of videotape and materials recovered because TD secured the workplaces of employees involved in misconduct.”

Additionally, and becoming increasingly standard in such resolutions, the culpable entities are engaged in clawbacks. Argentieri noted that the Bank “took steps on its own to hold its employees financially accountable. The Bank clawed back bonuses, including for its CEO and other executives, resulting in a dollar-for-dollar reduction of the Bank’s fine of approximately $2 million.” Yet she emphasized that the Bank’s “resolution marks a first. This is the first time a company has committed to clawing back compensation prospectively. Over the next few months, TD will identify additional compensation it will claw back from its employees. And if the bank is successful during the term of its agreement with the department, the Criminal Division will credit those clawbacks against the fine.”

I will explore this matter in some depth over the next several blog posts. Tomorrow, I will consider how profits over compliance led to disaster.

Resources 

OCC

OCC Press Release

Consent Order 

Civil Money Penalty 

DOJ 

TD Bank US Holding Company Information

TD Bank N.A. Information

TD Bank US Holding Company Plea Agreement and Attachments

TD Bank N.A. Plea Agreement and Attachments

Merrick Garland Remarks

Nicole Argentieri Remarks

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Daily Compliance News

Daily Compliance News: October 11, 2024 – The Breaking Up May Be Hard to Do Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen to the Daily Compliance News. All from the Compliance Podcast Network.

Each day, we consider four stories from the business world: compliance, ethics, risk management, leadership, or general interest for the compliance professional.

In today’s edition of Daily Compliance News:

  • Google to try and delay, deflect breakup. (FT)
  • For Ecuador, President and VP barred entry into the US. (Reuters)
  • TD Bank to pay $3bn in penalties. (WSJ)
  • Qantas apologizes for showing R-rated film on flight. (NYT)

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Daily Compliance News

Daily Compliance News: October 3, 2024 – The Gurbir Grewal Steps Down Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen to the Daily Compliance News. All from the Compliance Podcast Network.

Each day, we consider four stories from the business world: compliance, ethics, risk management, leadership, or general interest for the compliance professional.

In today’s edition of Daily Compliance News:

  • SEC head of Enforcement to step down. (WSJ)
  • New paths to CPA license emerge. (WSJ)
  • The ghost of Odebrecht lives on.  (WSJ)
  • FIs and FLs on common ground in compliance. (PYMNTS)

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Regulatory Ramblings

Regulatory Ramblings: Episode 54 – From Secret Service Agent to Global Financial Crime Fighter: David Caruso’s 30-Year Journey

David Caruso is the founder and managing director of the Dominion Advisory Group, a consulting firm based in Virginia, near the nation’s capital. The firm works with banks facing regulatory enforcement actions across the U.S., Europe, and Asia. David aids institutions and organizations in navigating financial crime risk and compliance modernization globally.

As a former special agent with the US Secret Service and a graduate of George Washington University since 1996, he has been at the forefront of shaping the financial crime risk and compliance profession more generally. Building anti-money laundering (AML) and sanctions compliance programs at banking and financial institutions across the US and internationally, overseeing headline-grabbing corruption and money laundering investigations, and building and selling a RegTech software firm have afforded him an ideal perspective to reflect on every major issue and trend occurring in the financial crime compliance space for the past 25 years.

In this episode of Regulatory Ramblings, David shares his reflections on a nearly three-decade career in AML and financial crime compliance with our host, Ajay Shamdasani. 

He recounts having worked at global institutions like JP Morgan, Riggs Bank, Wachovia, Washington Mutual, and HSBC, to name a few. His notable achievements include his time as Riggs Bank’s chief compliance and AML officer.

In that role, he was hired to address some program weaknesses cited by the US Treasury Department’s Office of the Comptroller of the Currency (OCC). While at Riggs, David’s team uncovered two notorious international corruption schemes involving the government of Equatorial Guinea and former Chilean dictator Augusto Pinochet. The team’s work led to investigations by the Department of Justice and the U.S. Senate Permanent Subcommittee on Investigations. 

The cases drew worldwide media attention from justice authorities in the US, UK, Spain, and Chile. The facts uncovered by David at Riggs shook US lawmakers and regulators, kicking off 10 years of active regulatory and law enforcement action against banks across the US. 

After Riggs, David founded The Dominion Advisory Group in 2005. From his ringside seat near Washington, DC, he works closely with executive management, boards, and outside counsel to craft responses and build entire financial crime risk and compliance programs to address regulatory concerns—of which there has been no shortage in recent years. 

David also discusses the allure of AML and financial crime compliance and what brought him to the professional path he has been on for over three decades. Methodologically speaking, he recounts what has changed in AML and financial crime in that time and what has remained the same. 

He concurs that since 1970, so many additional requirements and expectations have been created that AML teams still need to catch up on their primary mission. Reflecting on the impact of the Bank Secrecy Act (1970), the USA PATRIOT Act (2001), the Foreign Account Tax Compliance Act (2010), or FATCA, and the more recent Anti Money Laundering Act (2020), he shares his views on how the impact of regulatory action has distracted from compliance professionals’ more critical tasks—with an eye towards how the regulatory exam-focused mindset of money laundering reporting officers (MLROs) affects operations and innovation. 

David also depicts the pervasive and ongoing discrepancies between what domestic and international/supernational policy-setting organizations, like the Financial Action Task Force (FATF), based in Paris, say and what they do. He says, “No one wants to ask if new rules and regulations are working and whether they prevent crime or have the unintended consequence of reducing [economic] growth?” 

He acknowledges the degree of geopolitical hypocrisy when it comes to AML and financial crime compliance, as well as when it comes to fighting bribery, fraud, and corruption internationally. Washington, New York, London, and Brussels all too often regulated the financial world. Yet, while the US and UK, and increasingly the EU, are some of the most aggressive jurisdictions regarding financial crime enforcement actions, their regulatory apparatus is often used to further their geopolitical goals. It is a view that many outside the West hold. 

The conversation concludes with David’s views on why sanctions against Russia stemming from its 2022 invasion of Ukraine have largely been unsuccessful, how technologies such as artificial intelligence can help AML/KYC/FCC compliance, and what policy recommendations he suggests moving forward. 

We are bringing you the Regulatory Ramblings podcasts with assistance from the HKU Faculty of Law, the University of Hong Kong’s Reg/Tech Lab, HKU-SCF Fintech Academy, Asia Global Institute, and HKU-edX Professional Certificate in Fintech.

Useful links in this episode:

  • Connect or follow David Caruso on LinkedIn

  • Dominion Advisory Group: Webpage

You might also be interested in:

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Daily Compliance News

Daily Compliance News: September 25, 2024 – The $11bn Forfeiture Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen to the Daily Compliance News. All from the Compliance Podcast Network.

Each day, we consider four stories from the business world: compliance, ethics, risk management, leadership, or general interest for the compliance professional.

In today’s edition of Daily Compliance News:

  • Carolyn Ellison is sentenced to 2 years in prison and forfeits $11 billion. (NYT)
  • Wagner Group used HSBC and JPMorgan for payments. (FT)
  • China probes PVH. (Reuters)
  • Wells Fargo must face a Caremark claim. (Reuters)

Categories
10 For 10

10 For 10: Top Compliance Stories For The Week Ending August 31, 2024

Welcome to 10 For 10, the podcast that brings you the week’s Top 10 compliance stories in one podcast each week. Tom Fox, the Voice of Compliance, brings to you, the compliance professional, the compliance stories you need to be aware of to end your busy week. Sit back, and in 10 minutes, hear about the stories every compliance professional should be aware of from the prior week.

Every Saturday, 10 For 10 highlights the most important news, insights, and analysis for the compliance professional, all curated by the Voice of Compliance, Tom Fox. Get your weekly filling of compliance stories with 10 for 10, a podcast produced by the Compliance Podcast Network.

  • Treasury loosens AML requirements for financial advisors, real estate agents. (WSJ)
  • Top Chilean lawyer indicted on corruption charges. (FT)
  • Criminal convictions in Switzerland for 1MDB scandal. (Reuters)
  • More Boeing whistleblowers claim fraud by the company. (BBC)
  • Italy opens criminal investigation into yacht sinking. (FT)
  • Telegram CEO detained in France. (Bloomberg)
  • Why is Illinois so corrupt? (Chicago Tribune)
  • Nordea Bank to pay $35MM for AML violations. (WSJ)
  • South Africa investigating $7bn worth of corruption at state-owned enterprises. (Toronto Star)
  • GenZ guide for getting ahead at work. (WaPo)

For more information on the Ethico Toolkit for Middle Managers, available at no charge, click here.

You can check out the Daily Compliance News for four curated compliance and ethics-related stories each day here.

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Daily Compliance News

Daily Compliance News: August 28, 2024 – The $100MM Podcast Deal Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen to the Daily Compliance News. All from the Compliance Podcast Network.

Each day, we consider four stories from the business world: compliance, ethics, risk management, leadership, or general interest for the compliance professional.

In today’s edition of Daily Compliance News:

  • Nordea Bank to pay $35MM for AML violations. (WSJ)
  • South Africa investigating $7bn worth of corruption at state-owned enterprises. (Toronto Star)
  • Top Chilean lawyer indicted on corruption charges. (FT)
  • Mexico wants to have elected judges. What could go wrong? (See: Texas). (Bloomberg)

For more information on the Ethico ROI Calculator and a free White Paper on the ROI of Compliance, click here.