Taking federal bailout money can come with a lot of strings attached: public relations strings, capital oversight strings and, surprisingly, anti-money laundering compliance strings.
U.S. investigators arrested the former chief executive officer of a Manhattan-based bank Monday for allegedly embezzling money from a fraudulent loan and attempting to cheat the government out of federal bailout funds.
Financial institutions should practice special due diligence in dealing with funds distributed under the Troubled Asset Relief Program because they may be used to launder money and perpetrate fraud, according to a Financial Crimes Enforcement Network advisory issued Wednesday.
A government watchdog's call for stronger anti-money laundering controls on a federal bank bailout program could result in a "significant step up" in compliance duties for companies involved, say consultants.
Federal regulators that uncover anti-money laundering lapses at banks could face an unusual challenge this year: how to penalize an institution that has been propped up with government money.
Plans to have flailing financial institutions certify how they use bailout funds may leave the companies open to large fines under the False Claims Act, say legal experts.