Update regulators fine lone star bank $2 million; gonzalez says regulations excessive business themonitor.com gas works park events


Lone Star officials admitted to the allegations made against the bank and agreed to pay a $1 million fine, said a 13-page document called an Assessment of Civil Money Penalty, and produced by a unit of the Treasury department called the Financial Crimes Enforcement Network and known in the banking industry as FinCEN. This entity is tasked with guarding against money laundering activity.

The civil money penalty document did note that Lone Star has addressed the deficiencies identified by banking regulators. “The bank closed its account with the foreign bank and has modified its customers and services to mitigate the money laundering risks of certain accounts, including a limitation of overall foreign deposits,” said the FinCEN document, referring to the depositor that had $260 million in suspicious activity.

Lone Star expressly agrees that it shall not, nor shall its attorneys, agents, partners, directors, officers, employees, affiliates, or any other person authorized to speak on its behalf, make any public statement contradicting either its acceptance of responsibility set forth in the consent or any fact in the determinations section of the consent,” the document states.

“The bank accepts responsibility for its past BSA compliance issues, including those related to foreign correspondent banking,” the statement said. “Every employee, manager, and member of the Board of Directors of Lone Star is committed to preventing the bank’s products and services from being exploited by persons engaged in money laundering or other illegal activity and to being a banking industry leader in BSA compliance. From the day it was founded in 1983, the Board of Directors and management of Lone Star have endeavored to conduct business with the highest ethical standards and have been committed to service to our customers and communities. Lone Star actively cooperates with federal, state, and local law enforcement authorities and has never put revenue considerations ahead of compliance.”

Lone Star President S. David Deanda Jr. expanded on the statement, saying, “The issues in FinCEN’s assessment took place in the past and have been fully corrected. Today, we are proud of the strong and effective compliance program that we have put in place. We believe that our program should be a model for the banking industry in South Texas and beyond. We have no higher priority than to protect the bank from being exploited for improper purposes.

“Without sufficient internal controls or experienced BSA (Bank Secrecy Act) staff, the bank engaged in high-risk foreign correspondent banking services without conducting appropriate due diligence, and without adequately monitoring and reporting suspicious activity,” the FinCEN document said.

“At times previous to 2010 and continuing from 2010 through 2014, Lone Star had repeated deficiencies and failures in implementing adequate risk-based procedures for conducting customer due diligence,” the document said. “Lone Star consistently failed to collect and analyze information necessary to assess each customer’s risk and to develop and implement specific customer risk profiles. Lone Star failed to identify the intended purpose of the customer’s account, the anticipated activity within the account, the nature of the customer’s business, the types of bank products and services used by the customer, and geographic indicators of risk.”

“Lone Star plainly failed to ask obvious due diligence questions in connection with its foreign bank account relationship, and did not follow up on inconsistencies in answers to the questions that it did ask,” El-Hindi stated in a news release. “Notwithstanding the fact that the OCC already fined the bank, FinCEN’s assessment takes into account the penalties specifically applicable under FinCEN’s Section 312 authority. Smaller banks, just like the bigger ones, need to fully understand and follow the 312 due diligence requirements if they open up accounts for foreign banks. The risks can indeed be managed, but not if they are ignored.”

“Currently, small banks and credit unions are burdened with the “policing” of foreign deposits," Gonzalez said in a statement to The Monitor. "I am seeking to alleviate this burden and shift the burden to where it properly resides, the federal government,”Gonzalez said.

“The government should not rely on financial institutions to enforce its laws and this bill would ultimately seek to rectify that with respect to foreign deposits," Gonzalez said. "That being said, the details of my proposed legislation are still pending and I look forward to offering the bill once we enter the second session of the 115th Congress in early 2018.”

The burdensome regulations, Gonzalez said, were having a negative effect on investment in the Rio Grande Valley. “We should talk about how foreign deposits get invested and re-invested in our community, and how we should make it easier for our friends and neighbors to the south to deposit and invest in the RGV,” Gonzalez said.