Ignoring warnings earns US Bank compliance officer a $450K personal fine

It is being reported from the US that Federal regulators there are now often looking past CEOs and general counsel and taking aim at compliance officers personally.

In a latest move, a US regulator says Michael LaFontaine repeatedly ignored warnings by other compliance staff and by regulators that the bank's monitoring system was not adequate because it capped the number of AML alerts generated by suspicious transactions.

According to the FinCEN order, Michael LaFontaine at various times had responsibility for overseeing the U.S. Bank’s anti-money laundering (AML) compliance function. During his time with the bank, LaFontaine held roles of increasing responsibility, as chief compliance officer from 2005 through 2010, followed by senior vice-president and deputy risk officer, and finally to executive vice-president (EVP) and chief operational risk officer.

According to the publication Compliance Week, in his role as EVP and chief operational risk officer, LaFontaine reported directly to the chief executive officer and had direct communications with the board of directors. As chief operational risk officer, he oversaw the bank’s AML compliance department, with supervisory responsibility over the bank’s CCO, AML officer, and AML staff.

Because of his oversight roles, the complaint alleges, LaFontaine shared responsibility for the bank’s violations of the requirements to implement and maintain an effective AML compliance program and file in a timely manner Suspicious Activity Reports (SARs), as required by the Bank Secrecy Act (BSA). In 2018, FinCEN, with the Office of the Comptroller of the Currency (OCC) and the Department of Justice, issued a $185 million civil money penalty against U.S. Bank for its role in these violations.

Compliance lessons

The enforcement action against LaFontaine offers several important lessons for compliance officers in the financial services industry:

AML technology must be used properly to prevent violations. While U.S. Bank used automated transaction monitoring software, called 'SearchSpace', to spot suspicious activity, it improperly capped the number of alerts generated, misconduct that continued for at least five years. 'LaFontaine was warned by his subordinates and by regulators that capping the number of alerts was dangerous and ill-advised,' said FinCEN Director Kenneth Blanco. Consequently, his actions prevented the proper filing of thousands of SARs. 'FinCEN encourages technological innovations to help fight money laundering, but technology must be used properly,' Blanco added.

Full Compliance Week article