Are federal regulators unfairly targeting south Florida community banks in their crackdown on money laundering?
Community bankers there think so, and told regulators as much at a meeting last week in Miami. The purpose of the meeting, which was sponsored by the Financial Crimes Enforcement Network, was to bring bankers and regulators together to talk about the new Bank Secrecy Act compliance manual, released in June.
But bankers used the opportunity to complain about what they see as overzealous enforcement and scrutiny of small banks' anti-laundering procedures.
"There is a perception in south Florida that small and midsize banks doing international transactions are not being treated as fairly as the larger banks," said Patricia Roth, the executive director of the Florida International Bankers Association.
Fincen has sponsored similar meetings in four other cities, but the one in Miami drew the biggest crowd, said Alex Sanchez, the chief executive officer of the Florida Bankers Association.
That could be because so many South Florida community banks have been hit with enforcement orders for Bank Secrecy Act violations. In the last 18 months five Miami-area community banks have received cease-and-desist orders for failing to report or properly monitor suspicious transactions.
Miami banks, because of their proximity to Latin America, are more likely to have international clients than banks in other parts of the country, so it stands to reason that they would be watched more closely.
Still, Florida community bankers point out that not one of the 10 largest banks operating in the state has been cited for BSA-related violations.
William Langford, the director of Fincen's policy and regulatory division, said that he has heard community bankers' concerns and that the agency is addressing them. He added that the new manual would definitely help to make examinations and enforcement more consistent.
"We apply the same regulations consistently for all banks," Mr. Langford said in an interview Monday. "But perception is reality, and if small banks feel we are being more critical of them, then we must find out why this is happening."
Wells Fargo & Co. has no operations in Florida but some say it has received special treatment. American Banker reported in June that the Office of the Comptroller of Currency gave the San Francisco-based company a private enforcement order, rather than a fine or public cease-and-desist order, for BSA-related violations.
That decision - and the fact it was made after a meeting with Wells executives - was heavily criticized by some members of Congress, who said regulators have been lenient on certain banks and hard on others.
(Of course, executives at AmSouth Bancorp. in Birmingham, Ala., might not agree. The $50 billion-asset company was fined $50 million last year for failing to file suspicious-activity reports on a suspected Ponzi scheme.)
Seno Bril, the president of the Florida International Bankers and the Miami general manager for France's BNP Paribas, said he knows of many smaller banks that have dropped the accounts of international customers because of regulatory pressures. These customers have ended up opening new accounts at one of the larger banks in town, he said.
If this continues, Mr. Bril said, some banks might stop accepting deposits from international customers and refuse to lend to businesses that buy and sell overseas. "My concern is that this will force small institutions out of this market," he said.
To an extent it is already happening. After the $281 million-asset International Bank of Miami was slapped with a cease-and-desist order last fall, its CEO, Alberto Valdes, said that it would start focusing more on domestic customers.
Four Miami-area banks that received enforcement orders - the $831 million-asset BAC Florida Bank, the $137 million-asset Beach Bank in Miami Beach, the $215 million-asset Continental National Bank of Miami, and the $278 million-asset Eagle National Bank in Doral - are scaling back their international business.
Joaquin Urquiola, the director of the bank internal audit practice at Goldstein Schechter Price Lucas Horwitz & Co. in Coral Gables, Fla., said that most of his banking clients are taking in fewer international deposits because of BSA pressures, and that one even got rid of all its international accounts for fear of running afoul of examiners.
Mr. Sanchez said that regulators' crackdown does not square with the Bush administration's policy of promoting freer trade between the United States and Central America.
He said many business owners in South Florida would like to take advantage of the Central American Free Trade Agreement, which Congress passed in July. But Mr. Sanchez said bankers attending the Miami meeting told regulators that they are wary of doing business with these in no rush to do business with these companies in the current regulatory climate.
"Miami is arguably the capital in this hemisphere for international trade," he said. "We can't have on one side the President and the governor pushing Cafta but on the other hand having regulators saying we have to close the accounts that facilitate this trade."
