Risk Management

American Express to Pay $65M Money-Laundering Fine

To end a three-year federal investigation, the company also entered into a deferred prosecution agreement with the Department of Justice.
Stephen TaubAugust 7, 2007

American Express Co. will pay $65 million to resolve allegations that one of its subsidiaries had violated the federal government’s anti-laundering laws.

The financial services giant also entered into a deferred prosecution agreement with the Department of Justice in connection with a charge that the company failed to maintain an effective anti-money laundering program at Miami-based subsidiary American Express Bank International (AEBI). American Express has waived indictment and acknowledged responsibility for its employees’ behavior in a statement filed with the U.S. District Court of the Southern District of Florida. As long as the company meets the agreement terms, the DoJ will dismiss the one count against it after one year.

The orders for American Express to pay several penalties for alleged violations of the Bank Secrecy Act (BSA) followed a three-year investigation by the DoJ, the Federal Reserve Board, and the Financial Crimes Enforcement Network (FinCEN).

The Federal Reserve Board determined that AEBI had significant breakdowns in carrying out its BSA compliance activities and subsequently “failed to establish and maintain procedures adequately designed to ensure and monitor AEBI’s compliance with the BSA and related laws and regulations,” according to a joint statement from the Fed and FinCEN.

The agencies also said AEBI failed to implement adequate internal controls, conduct adequate independent testing, and designate compliance personnel to ensure compliance with the BSA. The law requires banks to establish internal policies, employee training, and independent tests to protect themselves against money-laundering activities.

DoJ investigators believes some of AEBI accounts were used to launder more than $55 million of drug proceeds through unregulated transferals of U.S. currency and South American currency. “AEBI operated in certain high-risk jurisdictions and business lines without commensurate systems and controls to detect and report money-laundering and other suspicious activity in a timely manner, as well as manage the risks of money laundering, including the potential for illicit drug trafficking-based Black Market Peso Exchange transactions,” according to the FinCEN press release.

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