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In an American Banker article this week entitled “It’s Anyone’s Guess How FinCEN Determines Fines”, Bob Serino, AABD’s BSA/AML Issues Advisor and Counsel to BuckleySandler, points to FinCEN’s lack of standards and formal processes in deciding whether to impose a penalty on banks or their insiders and the amounts.  Plus Congress has given FinCEN the power to assess a penalty without a fact-finding hearing before an administrative law judge.  No standards, unilateral power, and wide discretion.  A scary combination.

It’s Anyone’s Guess How Fincen Determines Fines

For many years, the federal banking agencies have used publicly available processes and matrices to determine both whether a civil money penalty is justified and, if so, the size of the fine. They must also litigate the action in a formal Administrative Procedure Act proceeding, brought before an independent administrative law judge. Most recently, the Office of the Comptroller of the Currency updated the guidelines on civil money penalties as well as cease and desist orders to enhance consistency.

In contrast, the Financial Crimes Enforcement Network has not publicly disclosed any civil money penalty matrix or criteria to determine either the justification or amount of a penalty. There is an urgent need for Fincen to bring its process into alignment with the other regulators. As it stands, there is no publicly known process to ensure that Fincen’s vast power is applied consistently and equitably. Likewise, as it stands now, Fincen can unilaterally and publicly assess a penalty on an institution or person without any standards, hearing or opportunity for the targeted party to appeal.

On Feb. 26, the OCC reiterated its intention to continue using a matrix for assessing appropriate fines, with adjustments to its decision-making process to strengthen fairness and consistency. The OCC’s changes – consistent with congressional requirements for the agency to use statutory criteria to justify an action – include one matrix for institutions and, for the first time, a separate matrix for institution-affiliated parties. Three days later, the OCC issued a revised bulletin on cease-and-desist powers in cases of “potential noncompliance with Bank Secrecy Act compliance program requirements or repeat or uncorrected BSA compliance problems.”

Why Fincen has no uniform process, administrative standards or a required hearing is beyond explanation. Most agencies follow standards and statutes that usually call for a hearing. There is nothing unique about the BSA that would require a different process for the banking agencies versus Fincen. A lack of any guidance is troubling since it allows Fincen largely unfettered power, opening the door to arbitrary and unjustified decisions.

Well-defined standards for fines from the bank regulatory agencies date back to the seventies. In 1978, Congress amended the Financial Institutions Supervisory Act of 1966 to provide regulators, for the first time, with the power to assess civil penalties for violations of laws and regulations.

The statute also required a formal hearing under the APA before an independent administrative law judge on pending enforcement actions. Regulators have the power to make the final decision on issuing a fine, but a company or individual targeted has the right to appeal an action to a federal court of appeals. As required by Congress, a bank regulator deciding whether to bring a case and impose a penalty must evaluate five statutory criteria to justify an action. The factors include: size of the financial resources and good faith of the person or entity charged; the gravity of the violation; history of previous violations; and such other matters that justice may require.

Fincen has neither publicly available factors nor any hearing rights.

This piece was originally published in American Banker’s Bank Think. Click here to read the full article at