Statement of CFPB Director Rohit Chopra, Member, FDIC Board of Directors, on the FDIC's Policy Regarding the Annunzio Wylie Anti Money Laundering Act of 1992

When an insured bank is criminally convicted, that is not only a breach of law, but also an abrogation of the public trust that is fundamental in banking. When it involves money laundering, we have a clear directive to consider whether a bank should maintain its status as an insured institution.

In the 1980s and early 1990s, Congress was appalled by how permissive banks were towards their obligations to prevent money laundering and illicit finance. This concern crystallized with the case of an outfit known as the Bank of Credit and Commerce International. It was a foreign bank with U.S. operations, and it allegedly banked Saddam Hussein, Manuel Noriega, and the Medellin cartel, among other criminals. The bank was then shut down when the full scope of its fraud, manipulation, and criminal activity became clear.

In 1992, Congress responded to this blow up by stiffening the penalties imposed on banks engaged in criminal money laundering, among other enhancements to the anti-money laundering framework.

The Annunzio-Wylie Anti-Money Laundering Act, signed into law by President George H.W. Bush, requires the FDIC to initiate deposit insurance termination proceedings against state-chartered banks and savings associations that are criminally convicted of certain money laundering-related charges. For other related charges, the law affords the FDIC discretion as to whether it initiates deposit insurance termination proceedings. The law establishes similar directives to the Office of the Comptroller of the Currency regarding charter revocation for criminally convicted national banks.

Since the law was passed, we've seen criminal plea agreements designed to technically sidestep these automatic triggers. For example, a bank may have been convicted of conspiracy to commit one of the specific triggering charges. Conspiracy itself is a separate charge not technically on the Annunzio-Wylie list. We've also seen bank holding companies convicted of the Act's enumerated charges, even when the bank subsidiary engaged in the misconduct. Bank holding companies are not covered by the charter revocation and deposit insurance termination penalties.

It is clear that congressional intent is not being faithfully executed. The discussion draft of a new FDIC enforcement policy would fix that.¹

It would clarify that the FDIC intends to initiate deposit insurance termination proceedings against any insured depository institution criminally convicted of charges related to money laundering. If those charges are not technically enumerated in the Annunzio-Wylie Act, the FDIC intends to initiate deposit insurance termination proceedings under a separate statutory authority. Criminal convictions related to money laundering certainly meet the legal standard for deposit insurance termination proceedings under that authority.

To be clear, deposit insurance termination proceedings may not always lead to deposit insurance termination. It can lead to limitations short of termination, such as ending the ability to offer new insured accounts. Congress has outlined a careful process and clear set of statutory factors for the FDIC to consider. Perhaps most importantly, the size or clout of the institution is not a factor.

When banks are criminally convicted of assisting criminal cartels and terrorists, Congress expects that appropriate sanctions are at least considered. The discussion draft of the FDIC policy adheres to that directive.