CBW Bank Challenges $20 Million FDIC Penalty for Alleged AML Deficiencies

CBW Bank, a small community lender based in Kansas with assets totaling $90 million, is contesting a $20.4 million civil penalty imposed by the Federal Deposit Insurance Corporation (FDIC) over alleged "significant" anti-money laundering (AML) compliance failures.

The FDIC has accused CBW Bank of inadequate transaction monitoring, which it claims left the institution exposed to financial crime risks. According to the agency, these deficiencies were present during its review period from December 2018 to August 2020. CBW Bank has filed to dismiss the FDIC's action in federal court and has also requested a hearing to address the charges.

Among the specific failures cited, the FDIC alleges the bank neglected to independently test its AML systems, did not provide sufficient training for its Bank Secrecy Act (BSA) officer, and failed to allocate adequate resources to ensure compliance with AML regulations.

CBW Bank’s operations, which include international money transfers and correspondent banking services, generate the bulk of its revenue but are also identified as activities with heightened AML risks. One of the FDIC’s major concerns involves bulk cash shipments originating from Mexico, valued in the millions of dollars.

“Bulk cash shipments from Mexico are a major concern for U.S. law enforcement because they are often associated with money laundering in connection with drug trafficking activities,” the FDIC wrote in a recently published notice.

The bank reportedly relied on proprietary software called Context Engine to monitor transactions, but the system failed to flag suspicious activities. The FDIC highlighted that the software overlooked $400 million in wire transfers over an eight-month period involving high-risk jurisdictions, including Lebanon and Brazil.

Additionally, the FDIC criticized CBW’s AML team for lacking the necessary expertise to identify and mitigate risks. According to the agency, one AML officer admitted to having no prior experience in banking or AML compliance.

The FDIC further stated, “Due to the failures described above, the respondent [CBW] earned millions in fee income that it otherwise would not have earned if it had maintained an adequate AML/CFT compliance program.”

CBW Bank has not yet commented publicly on the allegations as it continues to contest the penalty in court. 

By fLEXI tEAM