The penalty will be included in a deferred prosecution agreement that could be issued as early as next week, the people said. The agreement will focus on AML deficiencies that resulted in suspicious transactions primarily between customers in the U.S. and Mexico several years ago, according to the people.
Robert Pargac, general counsel at San Fernando, Calif.-based Sigue, declined to comment, saying the company âdoesnât respond to rumors,â about impending mergers or regulatory actions. Justice Department officials did not return phone calls seeking comment; a spokesman for the Financial Crimes Enforcement Network, the agency responsible for administering Bank Secrecy Act compliance, declined to comment.
Compliance consultants say the record penalty comes as a damaging blow to the MSB industry, which has struggled to rebuild its reputation with the banking sector after a June 2004 letter from the U.S. Office of the Comptroller of the Currency identified MSBs as a high risk for money laundering.
Since then, a number of large institutions, including Bank of America and Wachovia, ceased doing business with many MSBs. The MSB sector is a $100 billion industry worldwide and provides services including cashing paychecks, issuing money orders or wiring cash to family in their home countries. Some 24,000 are registered in the U.S. In recent months, FinCEN and other regulators have taken actions to reduce the regulatory burden of banks that serve MSBs.
Banks could âdrastically overreact,â to the Sigue penalty and sever business ties with MSBs, regardless of their level of risk, said Jeff Sklar managing director of Bellmore, New York-based regulatory compliance firm, SHC Consulting Group.
He said the penalty should be viewed in a broader context, as only two âmaterial penaltiesâ rising into the millions of dollars have been levied against MSBs in the past five years. Colorado-based Western Union, the largest U.S. money transmitter, was penalized a total $16 million in three actions issued between 2002 and 2003 for failing to file suspicious activity and currency transactions reports. That penalty is currently the largest against a U.S.-based MSB, according to Fortent Inform data.
âI am hoping banks donât have a knee-jerk reaction to a major penalty and just cut and run,â Sklar said.
National Money Transmitter Association Executive Director David Landsman declined to comment on the Sigue case, but said no single penalty will be a black eye to the industry.
âAs an industry, we take money laundering very seriously,â he said. âWe have been on the forefront because we are under so much scrutiny. We have to do it better to overcome the prejudice against us.â
A licensed agent for Sigue and four other money remitters allegedly helped launder drug trafficking proceeds by structuring transactions to the Dominican Republic to avoid U.S. reporting requirements, according to an August 2007 indictment filed in federal court in Philadelphia.
In February, Sigue agreed with the California Commissioner of Financial Institutions to pay a $140,000 penalty to settle charges that it violated state financial rules related to the use of unapproved receipts and failure to post signs in both English and Spanish.
Sigue began a âvery aggressiveâ overhaul of its AML operations three years ago, increasing its AML compliance staff from 10 to 90 and spending âmillions of dollars to install industry-leading AML systemsâ Pargac said in a telephone interview Thursday.
The company is âabsolutely very committed to AML programs and supporting the governmentâs fight against money laundering and terrorist financing,â Pargac said. âJust as everyone else in the industry is in the process of enhancing programs, so has Sigue.â
Sigue, a closely held private company, says on its Web site that it is the âleading remitter of money transfers from U.S. to Mexico,â with several thousand agents in 48 U.S. states, Central and South America and the Caribbean. The company, founded in 1996, also has offices in Tijuana, Mexico.
According to the companyâs Web site, it has relationships with Wells Fargo Bank, Fifth Third Bank, US Bank, California Bank & Trust and Bancomer Transfer Services. Its âpay partnersâ include HSBC, ScotiaBank Inverlat and Quisqueyana, among others, according to the site.