Anti-Money Laundering Program and Procedures

The Foreign Corrupt Practices Act has taken center stage in the headlines for international finance problems. But last week the regulators let us know that the PATRIOT Act has not gone away. ING Bank agreed to forfeit $619 million after admitting that it covered up billions of dollars in transfers that violated U.S. sanctions on Iran and Cuba.

That was a record settlement under the OFAC regime. The settlement resolves OFAC’s investigation into ING Bank’s intentional manipulation of information about U.S.-sanctioned parties in more than 20,000 financial and trade transactions routed through third-party banks located in the United States between 2002 and 2007.

From the Settlement Agreement it looks like ING was trying to isolate some banking relationships with Cuba. It tried to isolate money originating from Cuba from the rest of the international banking world, at least so far as that money is banned from the international banking world. According to the Settlement Agreement, the bank and its employees went too far and altered transaction information to hide the evidence that money was coming from Cuba.

ING also deleted origination information for transactions involving Iranian money. The problem was that some of the transactions used US dollars, which meant the transactions were cleared through New York and subject to US jurisdiction.

Private fund managers are subject to OFAC restrictions and are otherwise prohibited from dealing with “bad guys.” FINRA has provided a template for small brokerage firms: Anti-Money Laundering (AML) Template for Small Firms.

The world of private equity is probably not very attractive for money laundering. The investments are long term and require the contribution of cash over many years. The investment is illiquid and will take years to be returned. Most money laundering transactions look for a more liquid transfer of cash. Since their illegal funds are isolated, they are already illiquid.

Sources:

Amsterdam Zuidoost ING-Bank is by Pieter Delicaat

http://www.treasury.gov/resource-center/sanctions/CivPen/Documents/06122012_ing_agreement.pdf

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