FinCEN: Bank linked to ‘cash for kids’ scheme ignored red flags
Wednesday, March 4, 2015 at 8:22AM
Richard L. Cassin in Bank Secrecy Act, FinCEN, First National Community Bank, Jennifer Shasky Calvery, Mark Ciavarella, Michael Conahan, Pennsylvania, Suspicious Activty Report

The First National Community Bank of Dunmore, Pennsylvania (FNCB) admitted that it failed to file suspicious activity reports on transactions linked to the judicial corruption scheme known as "cash for kids" that spanned more than five years.

Only after one of the judges involved in the bribery and kickback scheme pleaded guilty did the bank file a report.

The Treasury Department's Financial Crimes Enforcement Network (FinCEN) fined the bank $1.5 million for willfully violating the Bank Secrecy Act.

Two former judges in Pennsylvania -- Michael Conahan and Mark Ciavarella -- were ultimately convicted. Conahan was sentenced to 17.5 years in prison. Ciavarella was jailed for 28 years.

Conahan was on FNCB's board of directors. He controlled accounts at the bank through which he processed the bribes and kickbacks, FinCEN said.

Judges Conahan and Ciavarella took more than $2.2 million from the operator of two private, for-profit youth detention centers. In return, the judges sentenced thousands of juveniles to increase the number of residents in the centers.

"Despite several red flags indicating suspicious activity, FNCB did not file a single suspicious activity report related to these accounts until after Conahan's first guilty plea in 2009," FinCEN said.

Judge Conahan tried to disguise the bribes using his FNCB accounts. There were red flags that should have caused the bank to respond, FinCEN said.

The red flags included:

(1) a 2007 law enforcement subpoena for information related to Conahan and others. The bank responded to the subpoena but failed to conduct any further analysis or risk rate the accounts as required,

(2) activity as early as 2005 involving many large, round-dollar transactions often occurring on a single day, and

(3) an abnormal volume of activity compared to the account balances.

"During this time, the bank failed to file suspicious activity reports (SARs) on any of the accounts despite the numerous red flags," FinCEN said.

FinCEN and law enforcement agencies use SARs to investigate money laundering, terrorist financing, and other criminal activity.

Jennifer Shasky Calvery, the FinCEN director, said, “FNCB's failure to file timely suspicious activity reports may have deprived law enforcement of information valuable for tracking millions of dollars in related corrupt funds.”

A copy of FinCEN's February 27, 2015 order In the Matter of First National Community Bank of Dunmore, Pennsylvania (Order Number 2015-03) is here (pdf).

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

Article originally appeared on The FCPA Blog (https://www.fcpablog.com/).
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