The Financial Crimes Enforcement Network (FinCEN) has enforced a $390 million civil money penalty on Capital One for engaging in both "willful and negligent" violations of the Bank Secrecy Act.
The tongue lashing from the regulator relates to the failure to file suspicious activity and currency transactions reports at Capital One's Check Cashing Group.
The violations occurred from at least 2008 through 2014, and caused millions of dollars in suspicious transactions to go unreported, including proceeds connected to organized crime, tax evasion, fraud, and other financial crimes.
“The failures outlined in this enforcement action are egregious,” says FinCEN’s director Kenneth Blanco. “Capital One willfully disregarded its obligations under the law in a high-risk business unit. Capital One’s egregious failures allowed known criminals to use and abuse our nation’s financial system unchecked, fostering criminal activity and allowing it to continue and flourish at the expense of victims and other citizens. These kinds of failures by financial institutions, regardless of their size and believed influence, will not be tolerated.”
A business unit within Capital One's commercial bank, the Check Cashing Group was comprised of between approximately 90 and 150 check cashers in the New York- and New Jersey-area. Blanco says that during the course of establishingg the unit, Capital One was aware of several compliance and money laundering risks associated with banking this particular group, including warnings by regulators, criminal charges against some of the customers, and internal assessments that ranked most of the customers in the top 100 of the bank’s highest risk customers for money laundering.
Capital One acknowledged failing to file SARs even when it had actual knowledge of criminal charges against specific customers, including Domenick Pucillo, a convicted associate of the Genovese organized crime family. Pucillo was one of the largest check cashers in the New York-New Jersey area, and one of the highest-risk Check Cashing Group customers.
In May 2019 Pucillo pleaded guilty to conspiring to commit money laundering to the tune of $160 million in connection with loan sharking and illegal gambling proceeds that flowed through his Capital One accounts.
Capital One also admitted to negligently failing to file CTRs on approximately 50,000 reportable cash transactions representing over $16 billion in cash handled by its Check Cashing Group customers.
The company has since shut down the network and undertaken substantial remediation effforts related to its SAR and CTR filing systems and ML programmes over the past several years.