Banesco Agrees To Consent Order With Federal Regulators

, Daily Business Review

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A South Florida bank is working with federal regulators to correct previously unannounced deficiencies in its anti-money laundering policies, including some oversights that the bank's top executive said could have "theoretically, possibly" allowed dirty money to flow through the institution.

Banesco USA, the Coral Gables-based unit of Venezuelan financial giant Banesco Banco Universal S.A., said in a statement Friday that it agreed to a consent order finalized earlier this month with the Federal Deposit Insurance Corp., which asked the bank to fix "control, staffing and administrative deficiencies in its Bank Secrecy Act program."

Seno Bril, interim chief executive at the bank since August, told the Daily Business Review the issues arose directly as a result of the acquisition of failed North Lauderdale-based Security Bank N.A., which Banesco acquired in May 2012. Security has $101 million in assets and $99.1 million in deposits before it collapsed.

"When the bank acquired Security Bank, it realized soon after it didn't have the structure for growing that fast," Bril said, explaining the methodology the bank uses to flag possible illegal activity in high-risk accounts had not kept up with the inflow of a large number of such accounts from Security's ledger.

"We weren't taking into account all the factors that you should for high-risk accounts," Bril said, adding the "risk rating methodology" the bank uses to determine risk also had not kept up with growth following the merger. He explained shortcomings in the "information technology aspects" of the banks's compliance mechanisms were first to become apparent, followed by concerns about the operational part of the procedures.

"At this stage, neither us or the regulators have found any dirty money," Bril said. "That doesn't mean it couldn't have theoretically, possibly happened."

He emphasized the issues at hand had not affected core areas of the bank's operation, such as its capital ratio or the composition of its loan portfolio. He also said the bank had been proactive in addressing the deficiencies, hiring private banker Alba Prestamo and naming him chief risk officer last December in an attempt to strengthen compliance practices and notifying the FDIC of issues as early as February.

The bank's board created a special committee to deal with anti-money laundering compliance issues in March, began implementing a corrective plan in May and received feedback from federal regulators in July.

"We took the bull by the horns ourselves, and as a result [the regulators] have been very friendly," Bril said. "They confirmed the same findings that we have had and found a few more issues, but their attitude or the feeling that we have about their attitude is that they're thinking 'trust but verify.' "

Contacted Regulators

Banesco's revelation that it has been dealing with rectifying its dirty-money controls for more than a year is somewhat surprising given previous bank statements on compliance.

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