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Surge in Government Investigations Shows Money Laundering on the Increase; More Scrutiny of Overseas Accounts Means Additional Compliance Pressures

Not Just Financial Institutions but Casinos and "Hard Goods" Dealers Must Monitor and Report; Even Insurance and Real Estate Are Under Government Scrutiny, Warns Marks Paneth Advisor

NEW YORK, NY -- (Marketwired) -- 07/21/14 -- A recent surge in government investigations shows that many businesses -- including not just financial institutions but also casinos and dealers in "hard goods" such as jewelry, automobiles, boats and airplanes -- need to make sure they have money-laundering monitoring and compliance programs fully in place. Even the insurance and real estate industries are being looked at for money laundering, warns New York-based accounting firm Marks Paneth LLP.

Those organizations that fail to develop compliance programs might find themselves facing sanctions for violations of the Bank Secrecy Act (BSA), Anti-Money Laundering (AML) policies and procedures, and regulatory requirements. Not only organizations but also individual executives and directors can face penalties for noncompliance

Cash-intensive businesses as well as financial institutions are at risk if they fail to comply with the government's complex web of anti-money laundering regulations. And scrutiny of overseas accounts is on the increase. The US Treasury Department's recent intergovernmental initiatives to implement information reporting and withholding tax provisions of the Foreign Account Tax Compliance Act (FATCA) indicates that foreign financial institutions -- including those in jurisdictions that have been money-laundering havens -- may need to disclose more information to US Regulators.

"The regulations say that financial institutions such as banks, credit card companies and investment brokers must monitor and report transactions -- and the provisions apply to other businesses as well," says Sareena M. Sawhney, director in the Litigation and Corporate Financial Advisory Services Group of Marks Paneth.

"Businesses need to find out if the anti-money laundering regulations apply to them," Ms. Sawhney says. "If the answer is 'yes,' then they need to make sure they comply. Compliance means not just following the rules but also having your own written policies in place, and documenting the steps you take to track and monitor transactions."

"Casinos and hard-goods dealers are under scrutiny," Ms. Sawhney adds. "So are certain industries such as insurance and real estate. This is because of specific tactics that money launderers have been using, such as overfunding an insurance policy in order to receive a disbursement check upon withdrawal."

According to Ms. Sawhney:

  • Scrutiny -- and enforcement -- are on the increase. Money laundering is an enormous regulatory concern, not only because of conventional criminal activity but also because known terrorist organizations use money-laundering techniques to move funds across borders. The USA PATRIOT Act, put in place after the attacks of September 11, 2001, strengthened several provisions of the existing Bank Secrecy Act. Penalties are increasingly severe. Just recently, The Las Vegas Sands Corp. agreed to pay $47 million to the government for failing to report suspicious customer transactions.

  • Businesses must master many requirements and work with many agencies. A complex web of regulations and agencies govern money laundering. In addition to the Bank Secrecy Act and the USA Patriot Act, the US Department of Justice and the Internal Revenue Service also track overseas transactions for compliance with FATCA The US Securities and Exchange Commission enforces the Investment Advisors Act, which includes a broad 'compliance rule' that requires advisors to have written policies and procedures in place to prevent securities law violations -- including money laundering.

  • Compliance means not just following the rules, but also documenting that you did. Requirements are complex and sometimes overlap, but in general, they involve reporting large cash transactions and verifying the identities of people who make them. The key to compliance is to establish written policies and procedures that meet the requirements, then document the steps taken to ensure that transactions are correctly monitored and reported. All are subject to audit. Organizations can be sanctioned not only for allowing money laundering to take place, but also for failing to take the right steps, or document that they did.

  • Individuals can be sanctioned as well as businesses. In a case against OMNI Investment Advisors, the SEC charged the chief compliance officer, who the agency said failed to establish compliance programs even after the agency notified the firm about deficiencies. Business owners, compliance executives and other senior executives with oversight responsibilities, as well as directors can suffer penalties if there are compliance failures - or even if policies and procedures are found to be insufficient.

  • Businesses need to find out if they must comply -- and with which regulations -- and then take steps to make sure they are in compliance. The first step should be a consultation with a compliance expert to establish the scope of compliance requirements. Businesses must then take all necessary steps to ensure compliance -- including the development of written policies and procedures, the creation of reporting mechanisms, other internal controls, and staff training to make sure that all requirements are met and that the organization can withstand regulatory scrutiny. An independent review of policies and procedures can help ensure they meet the requirements.

"Anti-money laundering compliance is difficult -- but with enforcement on the increase, at-risk businesses cannot afford anything less than strict compliance," Ms. Sawhney says. "Any cash-intensive business needs to understand its compliance responsibilities and hold itself to the highest standards."

Ms. Sawhney is available for interviews and can author a bylined article. For more information, contact Katarina Wenk-Bodenmiller of Sommerfield Communications at (212) 255-8386 or [email protected].

About Marks Paneth LLP

Marks Paneth LLP is an accounting firm with over 500 people, of whom approximately 65 are partners and principals. The firm provides public and private businesses with a full range of auditing, accounting, tax, consulting, bankruptcy and restructuring services as well as litigation and corporate financial advisory services to domestic and international clients. The firm also specializes in providing tax advisory and consulting for high-net-worth individuals and their families, as well as a wide range of services for international, real estate, media, entertainment, nonprofit, professional and financial services, and energy clients. The firm has a strong track record supporting emerging growth companies, entrepreneurs, business owners and investors as they navigate the business life cycle.

The firm's subsidiary, Tailored Technologies, LLC, provides information technology consulting services. In addition, its membership in Morison International, a leading international association for independent business advisers, financial consulting and accounting firms, facilitates service delivery to clients throughout the United States and around the world. Marks Paneth LLP, whose origins date back to 1907, is the 33rd largest accounting firm in the nation and the 10th largest in the Mid-Atlantic region. In addition, readers of the New York Law Journal rank MP&S as one of the area's top forensic accounting firms for the fourth year in a row.

Its headquarters are in Manhattan. Additional offices are in Westchester, Long Island and the Cayman Islands. For more information, please visit

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