Fulton Financial's Anti-Laundering Problems Widen

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The Federal Reserve Boardhashit Fulton Financial in Lancaster, Pa., and its subsidiary Lafayette Ambassador Bank in Bethlehem, with a cease-and-desist order.

The Sept. 4 order identified "deficiencies" in Fulton's anti-money-laundering and Bank Secrecy Act compliance programs, the $17 billion-asset company said in a regulatory filing Tuesday.

It is part of a widening regulatory challenge for Fulton. The Office of the Comptroller of the Currency on July 14 issued consent orders in connection with three other Fulton Financial subsidiaries — Fulton Bank, Swineford National Bank and FNB Bank — over weaknesses in their BSA/anti-laundering programs.

There may be more regulatory actions to come. "One or more" other subsidiaries that use the same compliance programs may also become subject to enforcement actions, according to the filing.

The C&D order from the Fed requires that Fulton Financial "engage an independent third-party firm to conduct a comprehensive assessment" of its BSA/anti-laundering program, the filing said. The Lafayette unit also must hire an independent third-party firm to review transactions from Jan. 1 to June 30 that are associated with high-risk customers "to determine whether suspicious activity was properly identified and reported," the filing said.

The Fed may require a review of transactions for additional time periods depending on the results of the initial review, the filing said.

Fulton plan to invest $4 million to $6 million during the second half of this year to address BSA and anti-money laundering issues, Christopher McGratty at Keefe, Bruyette & Woods wrote in a research note Tuesday. Its leaders expect to make an additional $5 million in investment next year, with "a potential resolution in either later 2015 or early 2016," he wrote.

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