FinCEN Fines Former Compliance Executive for AML Failures

By Daniel Bethencourt

A former senior executive at U.S. Bank must pay $450,000 to the Treasury Department after failing to remove limits on transactional alerts that ultimately delayed or prevented the filing of thousands of suspicious activity reports.

Michael LaFontaine, the Minneapolis-headquartered bank’s chief operational risk officer from June 2012 until his departure in June 2014, also allowed anti-money laundering staff levels to remain “woefully inadequate,” according to a 14-page civil monetary penalty published Wednesday by the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN.

The penalty against LaFontaine comes two years after the assessment of more than $613 million in fines and forfeitures against the bank for capping alerts from 2009 to 2014, and filing more than 5,000 currency transaction reports that misidentified payments tied to money services businesses as lower-risk interbank transfers.

Sources told ACAMS at the time that compliance officers at several financial institutions were under federal investigations.

FinCEN claimed Wednesday that compliance employees at U.S. Bank reduced their workload in part by tuning the lender’s automated systems so that any account could not trigger more than one alert in a 90-day period. The bank also filed more than 5,000 currency transaction reports that misidentified money services businesses as lower-risk interbank transfers.

LaFontaine became U.S. Bank’s chief compliance officer in 2005 and deputy risk officer in 2010, the same year Wachovia Bank paid $160 million in penalties for capping transactional alerts and failing to screen hundreds of billions of dollars from high-risk currency exchanges in Mexico.

Even though U.S. Bank employed a similar strategy to the now-defunct, Charlotte, North Carolina-based lender, neither LaFontaine nor his subordinates viewed the enforcement action as significant enough to warrant any internal changes.

FinCEN also accused LaFontaine of ignoring warnings from U.S. Bank’s chief AML officer in 2009 and 2010 that compliance staffing levels had become “dangerously thin” and that testing showed that the policy of limiting alerts had allowed suspicious funds to go unreported.

U.S. Bank responded by scrapping threshold testing altogether in April 2012, nearly two years into LaFontaine’s tenure as deputy risk officer, according to FinCEN. The bureau did not specify who made the decision.

“While [LaFontaine] did take certain steps to upgrade the AML program, including advocating for and receiving funding for the replacement of the [transaction-monitoring] system in its entirety, his actions were inadequate to correct the deficiencies,” FinCEN claimed Wednesday.

LaFontaine ignored similar warnings from a new chief compliance officer and chief AML officer whom he personally recruited to U.S. Bank in mid-2012.

“The new CCO told Mr. LaFontaine the issues were so significant that they should be acting as though the bank was under a virtual OCC consent order,” FinCEN said, referring to the Office of the Comptroller of the Currency. “Again, Mr. LaFontaine failed to take sufficient action.”

LaFontaine avoided mentioning those issues during a November 2013 meeting with U.S. Bank’s chief executive officer to discuss the state of the lender’s AML program.

The bank’s chief AML officer and CCO assembled a presentation entitled “Overview of Significant AML Issues” in preparation of the meeting and clearly stated within it that alert volumes had been capped, but Lafontaine instead focused on other compliance issues.

Prosecutors claimed in their original, February 2018 complaint against the lender that the unidentified CCO reversed course before the meeting and softened the PowerPoint presentation to remove explicit references to alert caps.

The bank’s chief AML officer ultimately bypassed LaFontaine in May 2014 to notify U.S. Bank’s chief risk officer of the alert caps in an email. The following month, after the OCC also raised questions, the chief risk officer hired an attorney to investigate the bank’s AML program, and LaFontaine resigned.

The penalty highlights the importance of handling the concerns of subordinates with seriousness, according to a New York-based compliance officer with an Asia-headquartered bank who asked to remain anonymous.

“If you have credible escalations from your own staff, even if they’re not knowledgeable, you have to address it,” the person said. “If you think it’s a non-issue, you have to document why you think it’s a non-issue.”

A spokesman representing Fontaine emphasized in an emailed statement that regulators acknowledged some of the steps his client took to improve AML at the lender. “Mr. LaFontaine is proud of the work he did for U.S. Bank for more than a decade,” the spokesperson wrote.

U.S. Bank noted in a statement of its own that the penalty targeted one individual. “We are confident in the strength of the AML program we have in place today,” the bank claimed in the statement.

Contact Daniel Bethencourt at

Topics : Anti-money laundering , Counterterrorist Financing
Source: U.S.: FinCEN
Document Date: March 4, 2020