Federal regulators have fined Gibraltar Private Bank and Trust Company of Coral Gables a total of $4 million for violations of the U.S. Bank Secrecy Act, alleging in two separate complaints that the bank regularly failed to report activities consistent with money laundering.
The U.S. Treasury Department’s Financial Crimes Enforcement Network imposed a $1.5 million penalty. It accuses the Miami-Dade bank of failing to timely file 120 “suspicious activity reports,” or SARs, that corresponded to nearly $558 million in financial transactions during the years 2009 to 2013. Gibraltar’s failure to file the reports, the government said, may have helped former Fort Lauderdale attorney Scott Rothstein reap $1.2 billion in a Ponzi scheme that landed him a 50-year federal prison sentence.
“We may never know how that scheme might have been disrupted had Gibraltar more rigorously complied with its obligations under the law,” Jennifer Shasky Calvery, director of the financial crimes enforcement network, said in a written statement. “This bank’s failure to implement and maintain an effective [anti-money laundering] program exposed its customers, its banking peers, and our financial system to significant abuse.”
In a separate but “coordinated” action, regulators said, the federal Office of the Comptroller of the Currency, or OCC, issued a $2.5 million civil monetary penalty against Gibraltar Thursday. In 2014, the OCC placed Gibraltar under a consent order. The OCC’s penalties flow from a May 2010 investigation by the OCC’s predecessor, the Office of Thrift Supervision, that found widespread “failure” to file reports of suspicious activity, court records say.
Gibraltar’s chairman and CEO, Adolfo Henriques, did not return calls from the Miami Herald Thursday.
The fines, announced Thursday, add to other recent woes at the bank. Late last week, the bank’s founder and former CEO, Steven D. Hayworth, sued the bank in Miami’s federal court, alleging that the bank made Hayworth a scapegoat for the Rothstein Ponzi scheme scandal, forcing his departure, and breaching their obligations to him under contract. Rothstein, who was convicted of fraud in 2010, was a bank investor.
Hayworth left the bank in 2012. Current chairman Henriques joined the bank in 2011 as vice chair and was promoted when Hayworth departed.
Under federal banking law, financial institutions must “establish and implement an effective anti-money laundering compliance program as required by the [Bank Secrecy Act] and its implementing regulatations,” federal regulators wrote in a court filing assessing the penalty. “Gibraltar failed to establish and maintain adequate internal controls to assure ongoing compliance, and it did not provide adequate training for appropriate personnel.”
Gibraltar’s missteps were discovered in May 2010, the pleading says, when the then-Office of Thrift Supervision conducted an examination of the bank’s records. Four investigations conducted from 2011 through 2014 identified similar “significant deficiencies” in the bank’s compliance with reporting requirements. Flooded with a “large volume” of suspicious activity “alerts” — many of them “false positives” — the bank became unable to identify which banking activities were truly high risk, the pleading says.
Though Gibraltar had been warned that its monitoring system was deficient as early as 2010, the court record says, the deficiencies were “not fully rectified until mid-2014.”
“This FinCEN assessment shows how critical it is to have an anti-money laundering compliance program that actually works and that can withstand government scrutiny, as opposed to one that’s just something a bank has down on paper, which is exactly the type of programs that Ponzi schemers and other white collar criminals look to take advantage of,” said Andrew Ittleman, founder and partner at Fuerst, Ittleman, David and Joseph, who concentrates his practice in the areas of White Collar Criminal Defense and Anti-Money Laundering Compliance.
Editor’s note: An earlier version of this story misstated the total amount of fines imposed on Gibralter.