BANK America Corp was fined $US3 million ($3.9 million) by the NASD overnight for failing to follow anti-money-laundering rules in its handling of accounts held by billionaire Sam Wyly and his brother Charles.
The NASD said the penalty was the largest imposed by a US securities regulator for anti-money-laundering violations.
Bank of America did not admit wrongdoing. The settlement came four months after the No.2 US bank agreed to pay $US7.5 million ($9.7 million) to settle a separate money-laundering probe conducted by the Manhattan district attorney, Robert Morgenthau.
According to the NASD, Banc of America Investment Services Inc violated its own procedures in failing to obtain required information for 34 "high-risk" accounts, and not ensuring that suspicious activity reports were filed properly.
It said the failures defeated the purpose of anti-money-laundering and terrorist financing laws, and came despite in-house warnings from its clearing firm, a senior lawyer and its risk committee.
While the NASD did not identify the family, the accounts are identical to the Wyly accounts as described in an August 2006 report, Tax Haven Abuses: The Enablers, the Tools and Secrecy, by the US Senate Permanent Subcommittee on Investigations.
Representatives for the Dallas-based family have said the Wylys believed the accounts were legal.
"We view very seriously situations where a broker-dealer firm decides it has high-risk accounts and doesn't follow its own procedures to assure it has adequately mitigated the risks," said Emily Gordy, the NASD deputy enforcement chief, said.
In this case, she said "there had been some concern at the firm that they might lose the account if they pressed too hard".
A lawyer and a representative for Sam Wyly were not immediately available for comment overnight.
Sam Wyly was recently worth $US1.1 billion ($1.4 billion), according to Forbes magazine.
The North Carolina-based Bank of America said it cooperated with the NASD and "takes very seriously its regulatory obligations to know its customers and assist regulators in the fight against money laundering, fraud and other illegal activity".
The NASD said the accounts involved Isle of Man-based trusts and private investment companies that held up to $US93 million ($120.4 million) of assets, and conducted multi-million-dollar wire transfers across international boundaries.
It said the accounts were opened at Bank of America Investment Services in August, 2003, and closed on November 8, 2004, mirroring the Senate report's discussion of the Wyly accounts.
In one instance, a Bank of America compliance officer complained the bank may not be "reporting the ownership of the shares adequately .... I do not believe that we understand their business, and I want to make sure they are in compliance with SEC (US Securities and Exchange Commission) regulations".
After the accounts were closed, Bank of America fired the investment services unit's general counsel and reduced the bonuses of three other executives, the Senate report said.
Ms Gordy said the NASD has imposed more than 100 penalties related to lapses in anti-money-laundering procedures and might impose more.
"It won't be the end of the line," she said.
"The sanction is as severe as it is because of the egregiousness of the conduct."
http://www.news.com.au/heraldsun/story/0,21985,21140665-5005961,00.html
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