WASHINGTON — The troubled story of First Bank of Delaware appeared to end Monday with the announcement of a $15 million penalty over charges it was a conduit for fraudulent activity.
The defunct bank is still liable for the fine despite having closed its doors as a result of its regulatory problems. On Friday, the bank announced it had effectively been dissolved after the sale of certain assets and deposit liabilities to Bryn Mawr Trust Co. Its state regulator terminated the bank's charter. The Delaware bank's wind-down plan was part of a 2011 consent order from the Federal Deposit Insurance Corp. (According to its June 30 call report, the bank had about $222 million in assets.)
The fine settles enforcement actions the bank faced over alleged Bank Secrecy Act violations from the FDIC, the Financial Crimes Enforcement Network, the Department of Justice and the U.S. Attorney's Office in eastern Pennsylvania. The allegations include that as early as 2008 the bank lacked adequate anti-money laundering measures and, either knowingly or turning a blind eye, aided fraudulent transactions on behalf of third-party merchants and payment processors. The authorities say the bank also failed to address concerns about high-risk customers in its money services business.
"First Bank facilitated consumer fraud and abuse by originating electronic transactions on behalf of dishonest third-party payment processors and merchants by providing them with access to consumer bank and credit card accounts without proper BSA controls," Fincen said in its enforcement action Monday. "Several third-party payment processor customers had documented histories of Federal Trade Commission Act violations, but there was no evidence that appropriate bank personnel investigated these 'red flags.'"
In a joint press release with other officials, Fincen Director Jennifer Shasky said as a result of the bank lacking an effective AML program, "financial predators were able to victimize consumers."
"To make money, First Bank of Delaware entered into risky lines of business and chose to disregard its Bank Secrecy Act responsibilities," Shasky said.
Martin Gruenberg, the FDIC's acting chairman, said the large size of the penalty "emphasizes the importance of having strong internal controls to assure compliance with anti-money laundering regulations and to detect and report potential money laundering or other illicit financial activities."
The regulators announced the fine just days after the bank had said its dissolution process had been finalized. First Bank of Delaware said assets and liabilities not sold to Bryn Mawr were put into a liquidation trust as required by a plan agreed to by shareholders in October. On Monday, the FDIC said it had terminated the bank's deposit insurance.