see also: in November 2002:   Customs Seizes 158 Tons of Narcotics During Fiscal Year 2002   Customs Kicks-Off Trade Symposium 2002   Customs and DOT Launch 'Operation Safe Commerce' Program   U.S. Customs Commissioner Comments on Congressional Approval of a New Department of Homeland Security   U.S. Customs Seizes Marijuana in Tractor Tires;   U.S. Customs Shares Seized Drug Money with State and Local Police and Canadian Law Enforcement ...more

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NEW YORK, NY - ROBERT C. BONNER, U.S. Customs Service Commissioner, JAMES B. COMEY, the United States Attorney for the Southern District of New York, and DAVID B. PALMER, Chief, Internal Revenue Service Criminal Investigation, announced that BROADWAY NATIONAL BANK ("BROADWAY") pled guilty today in Manhattan federal court to a three-count felony Information that charged the Bank with failing to maintain a legally-required anti-money laundering program, failing to make legally-required reports to the authorities regarding approximately $123 million in suspicious bulk cash and structured cash deposits and aiding and assisting customers to structure approximately $76 million in transactions to evade currency reporting requirements. Also today United States District Judge THOMAS P. GRIESA imposed a sentence of a $4 million criminal fine.

This is believed to be the first prosecution of a bank for failing to establish an anti-money laundering program and failing to file suspicious activity reports ("SARs"). Despite being provided with extensive warnings about its legal obligations under the Bank Secrecy Act by both banking regulators and its own consultants, according to the Information, BROADWAY failed to establish and maintain even a minimally effective anti-money laundering program.

As a result, BROADWAY failed to report suspicious financial transactions that occurred on a massive scale over a two-year period, including hundreds of bulk cash deposits totaling more than $46 million, and thousands of structured deposits of more than $76 million in cash in over 100 separate accounts at BROADWAY. Once these enormous and highly suspicious amounts of cash were deposited -- indeed one individual regularly dropped off a duffel bag full of cash in the teller area -- the money was promptly wired on the authorization of BROADWAY branch managers to bank accounts located in Latin America and the Middle East, including several well known money laundering havens.

As a result of its criminal conduct, according to the Government's Sentencing Memorandum, BROADWAY became a bank of choice for narcotics money launderers and other individuals who wished to shield their financial activities from the Government. Several narcotics money launderers who banked at BROADWAY informed the Government that they chose to launder their illegal narcotics proceeds at Broadway on the recommendation of other launderers and because Broadway personnel rarely asked questions, according to the Government's Sentencing Memorandum.

Bank Secrecy Act
Under the Bank Secrecy Act, banks are required to have anti-money laundering programs that enable them to identify and report suspicious financial transactions to the U.S. Treasury Department. Among other things, banks are required to develop internal procedures and controls, designate a compliance officer, maintain an ongoing employee training program, and provide an independent audit function.

As part of their anti-money laundering programs, banks must file currency transaction reports ("CTRs") for cash transactions of more than $10,000. Also under the law, banks are required to be vigilant for attempts by customers to evade the CTR requirement by illegally "structuring" their cash deposits by subdividing deposits into amounts of $10,000 or less and then conducting separate transactions in currency with those amounts to evade the requirement of filing a CTR.

In addition, banks have an affirmative legal obligation to report, where appropriate, to law enforcement agencies suspected structuring and other suspicious activities. Until March 31, 1996, banks were required to file Criminal Referral Forms ("CRFs") in any case involving "any known or suspected criminal violation, or pattern of violations . . . involving a financial transaction conducted through the bank and involving or aggregating $1,000 or more" or where "the bank was used to facilitate a criminal transaction, and the bank has a substantial basis for identifying a possible suspect or group of suspects." Banks were also required to file CTRs, and check the "Suspicious Transaction" box on the top of that form.

Since April 1, 1996, banks have been required to submit "Suspicious Activity Reports" ("SARs") in all instances in which one or more transactions aggregate $5,000 or more, and the bank knows or suspects the transaction involves, or is conducted to conceal, funds derived from illegal activities or may be used to evade a law or circumvent a reporting requirement.

Bulk Cash Deposits of $46 Million
According to the Information, the largest of the money launderers in dollar volume was Alfred Dauber who, from January 1, 1996, to March 9, 1998, made suspicious cash deposits of approximately $46 million into nine accounts at BROADWAY. Dauber opened the accounts claiming to BROADWAY to be in the "electronics business." But during this period, Dauber was participating in large-scale laundering of narcotics proceeds on behalf of a Colombian drug cartel. He has since pled guilty to laundering drug money at BROADWAY.

Dauber used BROADWAY to carry out his massive money laundering by having a "runner" regularly drop off an average of $178,000 in cash on a single day -- once as much as $660,645 in cash -- to one of several teller windows for deposit into his bank accounts at BROADWAY. These cash deposits - approximately 250 in just over a two-year period - were delivered to BROADWAY in duffel bags and other containers filled with hundred of thousands of dollars in small bills, wrapped in rubber bands. After dropping off the cash-filled bag at a teller's window, the runner typically would not wait, but would leave the bank while the cash still was being counted, and would return often the next day to pick up the emptied bag and deliver another bag containing tens of thousands of dollars more for deposit.

There was so much cash delivered to the bank for Dauber that the tellers often had to use their lunch hour to finish counting, and complained to senior BROADWAY bank managers about the time it took to process these enormous cash deposits. BROADWAY branch mangers would later authorize wiring much of the money to accounts in Colombia, Panama, and Miami, Florida, according to the charges. The Information alleges that BROADWAY failed to file CRFs or SARs for any of the Dauber transactions, even though BROADWAY was required to report these highly suspicious transactions to the U.S. Treasury Department under the provisions of the Bank Secrecy Laws.

According to the Government's Sentencing Memorandum, a BROADWAY executive, who was a member of its Board of Directors, once remarked that the bank should not invite Dauber to one of its annual Christmas parties because, in substance, "for all we know, Dauber is a drug dealer." In addition, the same member of the Board of Directors once cited his fear of civil liability to justify his unwillingness to file legally-required Suspicious Activity Reports, despite the protections of the Safe Harbor provisions in the law.

The Government's Sentencing Memorandum also states that at no time did BROADWAY make any inquiry of Dauber to determine if there was any legitimate business reason for the massive amount of cash activity he was generating. Indeed, Dauber and other money launderers deposited so much cash into BROADWAY accounts that during this period BROADWAY appears never to have sought cash from the Federal Reserve Bank of New York for its daily operations, and instead delivered to the Federal Reserve millions of dollars in cash. Nor did BROADWAY personnel check on the legitimacy of Dauber's operations by visiting the business address Dauber reported -- a location just a few blocks from one of the bank's branches.

After his arrest, Dauber informed the Government that he had chosen BROADWAY precisely because, unlike other banks in the New York area, BROADWAY personnel did not ask questions.

Structured Transactions
In addition to these bulk cash deposits, the Information also charges that BROADWAY routinely accepted and processed structured cash deposits without filing the required SARs or otherwise notifying the U.S. Treasury Department or other authorities. In total, BROADWAY customers structured approximately $76 million in cash deposits at BROADWAY with the intent to evade the filing of CTRs. Senior BROADWAY bank managers who reviewed account activity knew that the deposits had been structured to evade the filing of CTRs.

For example, as set forth in the Information, between January 1996 and March 1998, approximately $20 million in structured amounts of cash were deposited into 26 related accounts maintained by the Fares family and their associates at BROADWAY. The Fares family, including five members who have been convicted of laundering drug money, would structure the deposits of drug proceeds in an attempt to evade the filing of CTRs before having the money wired to offshore accounts.

For example, as detailed in the Information, on March 16, 1998, the Fares family made twelve structured cash deposits involving the proceeds of drug transactions into BROADWAY accounts in amounts between $8,990 and $9,900. The next day, the Fares family made twelve more similarly structured cash deposits involving the proceeds of drug transactions into related accounts at BROADWAY (including nine of the accounts into which deposits were made the day before), and the day after, the Fares family made five more similarly structured cash deposits involving the proceeds of drug transactions into related accounts at BROADWAY (each involving accounts into which deposits were made the day before).

The Information further charges that the funds were wired to bank accounts in Panama and Lebanon. BROADWAY failed to file CRFs or SARs for any of the Fares transactions, and filed only a single Suspicious CTR relating to a single Fares transaction specifically identified by BROADWAY's outside auditors in 1994. BROADWAY filed SARs for the Fares deposits for the first time only after the Office of the Comptroller of the Currency ("OCC") ordered BROADWAY to comply with the Bank Secrecy Laws following the OCC's March 1998 on-site examination.

The Information sets forth additional examples of blatant structuring of cash deposits by other convicted launderers of drug proceeds. A chart attached to the Government's Sentencing Memorandum is illustrative of the thousands of structured cash deposits.

BROADWAY has pled guilty pursuant to a plea agreement that stipulated that it would pay a $4 million fine immediately. The Government did not seek a term of probation because BROADWAY has effectively been under the supervision of the OCC through the Cease and Desist Order it issued on April 13, 1998, has operated successfully under the terms of the Order, and has established and implemented an effective anti-money laundering program in compliance with the OCC's directions. BROADWAY will continue to be subject to traditional supervision by the OCC.

Mr. BONNER stated: "Today's guilty plea, the first by a U.S. bank for two of these particular criminal violations, marks the successful conclusion of a lengthy investigation into Broadway National Bank by the "El Dorado" Task Force, a financial crimes task force in New York led by the U.S. Customs Service and the Internal Revenue Service. The services that BNB provided to criminal organizations were staggering in their audacity and their scope. Over the course of approximately two years, roughly $123 million was laundered through more than 100 accounts at the bank by various criminal groups and in many cases, bank personnel literally accepted duffel bags full of narco-cash for deposit with no questions asked."

Mr. COMEY stated: "The decision was made to charge Broadway because of the egregious nature of its failures to comply with the law, failures that are attributable to the institution as a whole as well as individuals. We will aggressively pursue banks that do nothing to prevent or to respond to money laundering and structuring. This case sends a message that we will prosecute financial institutions such as BROADWAY that flagrantly disregard their duties under the Bank Secrecy Act. The Government recommended a $4 million fine for a bank with modest revenues after careful consideration of the seriousness of the bank's conduct and also of BROADWAY's considerable reform efforts over nearly 5 years, under the supervision of the Office of the Comptroller of the Currency, to fully implement an effective anti-money laundering compliance program."

Mr. PALMER stated: "The integrity of our country's banking system rests upon the integrity of the individuals and institutions that comprise it. When people and institutions within the system engage in criminal activities, they endanger not only individual financial institutions and their customers, but also the entire banking system, the taxpaying public and the United States economy. In this investigation, BROADWAY NATIONAL BANK criminally structured transactions to evade reporting requirements and intentionally failed to report suspicious transactions. Although the bank's activities constituted such an assault upon the banking system, the public and the economy, the public should remain confident that the federal government is vigilant in detecting such activity and committed to investigating and ultimately prosecuting corrupt institutions and individuals."

Mr. COMEY further stated: "This country cannot win the battle against money laundering without the assistance and vigilance of financial institutions which are required by law to establish and implement effective anti-money laundering programs. Broadway National Bank utterly failed to implement any program at all, let alone an effective one, with the dire result that over approximately $123 million in narcotics proceeds was laundered through the bank. With this prosecution, the first ever charging a bank criminally with failure to implement the required anti-money laundering program and with failure to file Suspicious Activity Reports, we are putting financial institutions on notice that there will be consequences if they fail to obey the law." Mr. COMEY said that the investigation is continuing.

Mr. COMEY praised the exceptional investigative efforts of the United States Customs Service and the Internal Revenue Service, Criminal Investigation, which spanned over four years. He also thanked the Office of the Comptroller of the Currency, the Drug Enforcement Administration, the United States Postal Inspection Service, and the New York Organized Crime Task Force for their assistance in this case.