BAI Agrees To Pay $3M For Not Complying With Anti-Money Laundering Requirements

Banc of America Investment Services (BAI) Inc. says that it will pay $3 million in disciplinary charges for its alleged violation of anti-money laundering (AM) requirements.

The NASD says that BAI failed to acquire customer information for a number of high-risk accounts. It is also accusing BAI of failing to communicate sufficiently with its parent bank to make sure that BAI’S independent SAR (suspicious activity report) filing obligations were fulfilled. In addition, the NASD says that BAI did not properly investigate or pursue certain red flags, especially when its own clearing company had made repeated requests for additional information pertaining to certain account holders.

The NASD claims that BAI did not get the mandated additional information from customers who had 34 accounts involving trust and private investment corporations that were affiliated with one family and domiciled in the Isle of Man. The offshore accounts, collectively containing assets worth $79 Million to $93 Million, participated in multimillion-dollar wire transfers internationally.

The NASD says that, under terrorist financing and anti-money laundering laws, firms are supposed to take the appropriate steps to address high risks related to customers and transactions. When the 34 accounts were opened in 2003, the NASD says that even though BAI had set up AML procedures for high-risk customer accounts, such as asking for additional information (i.e., the names of the beneficial owners) before conducting major transactions for the accounts, BAI did not ask for the names of the beneficial owners of the 34 accounts, nor did it restrict these accounts’ activities from August 2003 to October 2004. As a result, the NASD says that BAI let the accounts “engage in large wire transactions,” and did not obtain the names even after a BAI attorney, a BAI risk committee, and BAI’s clearing firm insisted that the names needed to be secured.

Individuals at BAI were overheard worrying that if they asked for the names of the beneficial owners, the account holders might move the accounts elsewhere. The NASD is accusing BAI of not having a proper compliance program set up to report suspicious transactions.

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