Regulators Fine American Express $350 Million

Washington — U.S. banking regulators on 8 October penalised American Express for failing to catch and report suspicious money flows, including about $13 billion in suspected trade-based money laundering that its national bank did not report in time.

The Office of the Comptroller of the Currency, the federal supervisor for nationally chartered banks, assessed a $350 million civil money penalty and issued a cease-and-desist order against American Express National Bank of Sandy, Utah. The Federal Reserve Board issued a parallel cease-and-desist order against American Express Company and its travel-services subsidiary, requiring fixes to the firm's enterprise-wide financial-crimes programme. The OCC penalty goes to the U.S. Treasury.

What went wrong

Anti-money-laundering rules, rooted in the Bank Secrecy Act, require banks to know their customers, watch for unusual transactions and file suspicious-activity reports that help law enforcement. Trade-based money laundering hides illicit funds inside legitimate-looking import and export deals — for example by over- or under-invoicing goods.

The OCC said the bank's Bank Secrecy Act and anti-money-laundering programme was not reasonably designed for a firm of American Express's size. Failings included inadequate staff expertise, weak internal controls, weak independent testing and weak training for employees and directors. The bank's risk assessment focused too much on its narrow deposit products and too little on its dominant credit and charge-card business. Customer due diligence and identification procedures contributed to monitoring failures.

Those breakdowns, the OCC said, meant the bank failed to timely identify, evaluate and report "approximately $13 billion of suspected trade-based money laundering activity that took place over the past decade."

"The OCC expects banks of American Express's size and complexity to devote sufficient resources to ensure compliance with laws and regulations designed to detect and prevent money laundering, which are critical to both economic and national security," Comptroller of the Currency Jonathan Gould said. "American Express failed to maintain a BSA/AML compliance program properly aligned with the money laundering risks of its operations, which resulted in the bank's failures to timely identify and report significant missed suspicious activity and to provide important information to law enforcement."

What the Fed ordered

The Federal Reserve's consent order, effective 8 October, does not add a separate fine in the public release. It requires American Express and American Express Travel Related Services to submit, within 90 days, written plans for board oversight of the remediation, for an improved enterprise-wide anti-money-laundering programme, and for compliance at the travel subsidiary with sanctions enforced by the Treasury's Office of Foreign Assets Control. The firm must not employ again people who took part in the misconduct, were disciplined for it and left or were fired, and must keep cooperating with investigators. American Express consented without admitting or denying the Fed's allegations.

The Fed said supervisors at the Federal Reserve Bank of New York had found significant deficiencies in transaction monitoring, fraud referrals, third-party risk assessment and financial-crimes risk management, and that the firm had failed to detect, investigate and report certain suspicious activity in time.

What happens next

American Express must rebuild monitoring, customer checks and reporting under OCC and Fed oversight, with quarterly progress reports to the New York Fed. Neither regulator announced any limits on customer accounts; the orders target the company's compliance systems. The Fed said American Express had fully cooperated and had already begun fixing the problems.