Assistant Attorney General Michael Chertoff of the Justice Department's Criminal Division, U.S. Customs Commissioner Robert C. Bonner, David Palmer, Chief, Criminal Investigation, Internal Revenue Service, James Sloan, director of the Financial Crimes Enforcement Network (FinCEN), and Jennifer J. Johnson, secretary for the Board of Governors of the Federal Reserve System, announced that Banco Popular de Puerto Rico will forfeit $21.6 million to the United States as part of a deferred prosecution agreement on charges of failing to report suspicious financial activity. A criminal information filed at U.S. District Court in the District of Puerto Rico charges Banco Popular with one count of failing to file Suspicious Activity Reports (SARs) in violation of Title 31 USC 5318(g)(1) and 5322(a). 
The Federal Reserve Bank of New York (FRBNY) conducted four examinations of Banco Popular, the examinations, based on procedures used at the time, did not contain any criticism of the bank’s BSA compliance policies or procedures. Four (4) years after the individual first began laundering an undetermined amount of money through Banco Popular, FRBNY expanded the scope of the bank’s regularly scheduled safety and soundness examination as a result of information it received from a U.S. Customs Service drug investigation. Based on Anti Money Laundering (hereinafter, “AML”) compliance problems identified during the examination, FRBNY developed a supervisory strategy that led to a written agreement containing numerous remedial actions. Banco Popular also entered into a deferred prosecution agreement with Justice, FinCEN, and the Federal Reserve; and agreed to a civil money penalty of over $20 million.
Banco Popular waived indictment, agreed to the filing of the information, and accepted and acknowledged responsibility for its behavior in a factual statement accompanying the information. The company will forfeit $21.6 million to the United States to settle any and all civil claims held by the government. In light of the bank’s remedial actions to date and its willingness to acknowledge responsibility for its actions, the government will recommend to the court that any prosecution of the bank on the criminal charge be deferred for 12 months, and eventually dismissed with prejudice if the bank fully complies with its obligations. Concurrently, FinCEN has assessed a $20 million civil money penalty for violations of the Bank Secrecy Act against Banco Popular for its conduct, which will be deemed satisfied by the payment of the $21.6 million forfeiture. 
“Banks are our first line of defense against money launderers, drug dealers and even terrorists who would attempt to abuse our financial institutions,” said Assistant Attorney General Chertoff. “Banks that disregard their duty to conduct adequate due diligence and report suspicious financial activities allow themselves to be exploited for criminal purposes. The agreement recognizes that Banco Popular has been forthright in accepting its responsibility.” The charges and the deferred prosecution agreement filed arose out of transactions conducted by and through Banco Popular between June 1995 and June 2000. During this time, several unusual or suspicious transactions were conducted in connection with certain accounts at Banco Popular. Although the bank filed Suspicious Activity Reports (SARs) on these accounts, they were untimely or, in some cases, inaccurate.
In one series of transactions, Roberto Ferrario Pozzi deposited approximately $20 million in cash into a Banco Popular account from June 1995 to March 1998. Deposits were made to the account by Ferrario and employees of Phone Home, a phone card, long distance and money transmission service, often in paper bags or gym bags filled with small-denomination bills. Despite the suspicious nature of the deposits, the bank did not investigate and file timely and complete SARs reporting the activity. These untimely filings, the absence of supplementary SARs and the errors in the SARs that the bank did file hindered law enforcement’s ability to initiate investigations on these accounts in a timely manner, resulting in the laundering of millions of dollars of drug proceeds through these accounts. Ferrario was indicted in December 1998 for money laundering in connection with certain deposits to Banco Popular and was sentenced to 97 months imprisonment in 2002.
Under the Bank Secrecy Act, banks are required to have comprehensive anti-money laundering programs that enable them to identify and report suspicious financial transactions to the U.S. Treasury Department’s Financial Crimes Enforcement Network. As part of their anti-money laundering programs, banks must report suspicious activities through the filing of SARs. Since April 1, 1996, banks have been required to submit SARs to FinCEN in all instances in which one or more transactions aggregate $5,000 or more, and the bank knows or suspects the transaction involves, or is conducted to conceal, funds derived from illegal activities or may be used to evade a law or a reporting requirement. The SARs are a critical tool in law enforcement's efforts to investigate and prosecute cases. “The lengthy U.S. Customs/IRS investigation into Banco Popular de Puerto Rico established that millions of dollars’ worth of drug proceeds was laundered through this bank over a period of several years,” Customs Commissioner Bonner said. “In some cases, gym bags full of cash were literally brought into the bank for deposit by money launderers. Despite its legal obligation to report these suspicious transactions to the government in a timely manner, Banco Popular, in some cases, chose not to report these transactions until years after the fact, and did so only after learning about the U.S. Customs/IRS investigation into the bank.”
David Palmer, Chief, Criminal Investigation, IRS, stated: “The information filed should send a clear message that financial institutions who serve as a conduit for criminal activity will be pursued. Money laundering is a serious crime that affects not only those persons directly involved, but the economy as a whole.” James Sloan, director of FinCEN, noted that the BSA is designed to help prevent criminals from using the financial system to perpetrate criminal activity and to alert law enforcement when attempts are made to abuse the system. “Most banks and other financial institutions throughout the United States have excellent programs in place to help ensure that they are not vulnerable to illegal exploitation and their record of BSA compliance is extremely good,” Sloan said. “However, the American people have a right to expect that when an institution violated the trust of its account holders and its responsibility to preserve the integrity of its operations, it will face public scrutiny and severe penalties.” Chertoff, the head of the Criminal Division, praised the investigative efforts of the Internal Revenue Service and the U.S. Customs Service, which spanned more than four years. He also thanked the Board of Governors of the Federal Reserve System for their support and assistance. The case was prosecuted by the Criminal Division's Asset Forfeiture and Money Laundering Section, Chief John Roth, Deputy Chief Michael Davitt, and trial attorneys Stephen May, Cynthia Stone and Robert Boyer. The city of San Juan, Puerto Rico, was designated as one of four “High Intensity Financial Crimes Areas” nationwide. This designation resulted in the formation of a multi-agency task force that investigates financial crimes, mainly those dealing with SARs that are filed by financial institutions in Puerto Rico and the U.S. Virgin Islands.
As a result of the Deferred Prosecution Agreement at the United States District Court for the District of Puerto Rico, there were numerous innovations in BPPR’s BSA compliance program, including the following: 
A new BSA and AML Department was created and divided into three areas: detection and investigation, training and BSA audit, and compliance. Thirteen employees were assigned to this new department.
The Legal Requirements unit — the group that reviews and processes subpoenas — was elevated to department level and a new unit head was appointed.
BPPR’s Know your Client (hereinafter, “KYC”) policies were significantly revised and approved by BPPR’s board.
Training materials were revised, and a test was created to measure whether employees understand the training. In addition, the frequency of BSA and AML training was increased. BPPR provided BSA and AML training to substantially all of its employees.
BPPR hired Klynveld Peat Marwick Goerdeler (hereinafter, “KPMG”) to provide the bank with “best practices” for a BSA and AML compliance program. KPMG provided, among other things, advanced training to the AML Committee and certain employees of the Corporate Compliance Division and other departments involved in BSA functions, advice as to the most advanced suspicious activity software program and guidance on the implementation of a new written BSA compliance program.
BPPR purchased a new state-of-the-art suspicious activity detection software program called ASSIST. BPPR established broad parameters to identify suspicious activity and applies those parameters against all accounts at BPPR.
BPPR developed a “hot list” procedure to determine whether individuals identified in the news as having engaged in illegal activities had accounts at BPPR.
BPPR hired two new individuals with investigative and financial backgrounds to investigate suspicious activity. BPPR also began to file SARs on a weekly basis.
BPPR made extensive efforts to improve its Currency Transaction Reports (CTRs) review and filing function. The responsibility for the preparation and review of CTRs was transferred to an operations unit in retail banking to improve supervision over this process. The number of employees reviewing CTRs was doubled.
As a result of the Written Agreement by and between BPPR and Federal Reserve Bank of New York, there were also numerous innovations in BPPR’s BSA compliance program, including the following:
Bank Secrecy Act Compliance
l. (a) The Bank, and any institution-affiliated party thereof, shall not, directly or indirectly, violate the Bank Secrecy Act.
(b) For the purposes of this Agreement, the term "violate" shall include any action (alone or with another or others) for or toward causing, bringing about, participating in, counseling or aiding or abetting a violation.
(c) Within 45 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable written plan designed to ensure compliance with:
(1) The recordkeeping and reporting requirements for currency transactions of over $10,000 (31 C.F.R. 103.22);
(2) The identification requirements related to the recordkeeping and reporting requirements for currency transactions of over $10,000 (31 C.F.R. 103.28);
(3) The Bank Secrecy Act's exemption procedures (31 C.F.R.103.22);
(4) Recordkeeping requirements for the purchase of bank checks and drafts, cashier's checks, money orders and traveler's checks (31 C.F.R. 103.29); and
(5) The requirements related to the nature of records to be maintained and the retention period of such records (31 C.F. R. 103.38).
2. Within 45 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable enhanced customer due diligence program. The program shall be designed to reasonably ensure the identification and timely, accurate and complete reporting of known or suspected criminal activity against or involving the Bank to law enforcement and supervisory authorities as required by the suspicious activity reporting provisions of Regulation H (12 C.F.R. 208.62 and 208.63) of the Board of Governors. The enhanced customer due diligence program shall provide:
(a) For a risk focused assessment of the customer base of the Bank to:
(1) Identify the categories of customers whose transactions do not require monitoring because of the routine and usual nature of their banking activities; and
(2) determine the appropriate level of enhanced due diligence necessary for those categories of customers that the Bank has reason to believe pose a heightened risk of illicit activities at or through the Bank.
(b) For those customers whose transactions require enhanced due diligence, procedures to:
(1) Determine the appropriate documentation necessary to confirm the identity and business activities of the customer;
(2) Understand the normal and expected transactions of the customer; and
(3) Report suspicious activities in compliance with existing reporting requirements set forth in the regulations of the Board of Governors.
(c) Appropriate procedures to reasonably ensure that all new products involving the receipt or transfer of funds comply with applicable laws and regulations related to anti-money laundering compliance and suspicious activity reporting.
3. Within 45 days of this Agreement, the Bank shall submit to the Reserve Bank an internal compliance program, designed to, among other things, ensure and maintain compliance by the Bank with the Bank Secrecy Act. The program shall:
(a) Provide the means and sufficient staff to detect and monitor all currency and other transactions occurring at the Bank to ensure that the Bank complies fully with all applicable anti-money laundering and suspicious activity reporting and recordkeeping requirements;
(b) Provide effective training to all appropriate personnel at the Bank (including, but not limited to, tellers, customer service representatives, lending officers, and all other customer contact personnel) in all aspects of regulatory and internal policies and procedures related to the Bank Secrecy Act and the identification and reporting of suspicious transactions and to update the training on a regular basis to ensure that all personnel have the most current and up to date information;
(c) Provide for independent testing of compliance with all applicable rules and regulations related to the Bank Secrecy Act and the reporting of suspicious transactions; and
(d) Provide the means to ensure compliance with the regulations of the Office of Foreign Asset Control of the U.S. Department of the Treasury.
4. Within 45 days of this Agreement, the Bank shall submit lo the Reserve Bank an acceptable plan for conducting a review of all customers exempted from the recordkeeping and reporting requirements of the Bank Secrecy Act for currency transactions of over $10,000 (31 C.F.R. 103.22) to determine whether such customers have been appropriately exempted from such recordkeeping and reporting requirements.
5. Within 45 days of this Agreement, the Bank shall take such actions as are necessary to ensure that the BSA compliance program at the Bank is managed by a qualified officer, acceptable to the Reserve Bank, who shall have responsibility for all BSA compliance and related matters, including, without limitation, the identification and timely, accurate and complete reporting to law enforcement and supervisory authorities of suspicious activity or known or suspected criminal activity perpetrated against or involving the Bank.
6. Within 45 days of this Agreement, the Bank shall submit to the Reserve Bank an acceptable plan for a long-term strategy for strengthening and maintaining an internal audit function that tests for BSA compliance in an effective manner by, among other things, expanding audit scopes, greater audit frequency, and improved auditor training.
Plans and Programs
7. The written plans and programs required hereof shall be submitted to the Reserve Bank for review and approval. Acceptable plans and programs shall be submitted within the time periods set forth in this Agreement. The Bank shall adopt the approved plans and programs within 10 days of approval by the Reserve Bank and then shall fully comply with them. During the term of this Agreement, the approved plans and programs shall not be amended or rescinded without the prior written approval of the Reserve Bank.
8. Within 10 days after the end of each calendar quarter following the date of this Agreement, the Bank shall furnish a written progress report to the Reserve Bank detailing the form and manner of all actions taken to secure compliance with this Agreement, and the results thereof, as well as managements responses to the audit reports on Bank Secrecy Act compliance prepared by internal or external auditors during the quarter.
 A deferred prosecution is a legal procedure whereby the prosecution for an offense is deferred pending completion of corrective action.
 https://sentinel.truthtechnologies.com/mlds?page=bancopopular.html. (Last accessed December 12, 2013).
 http://www.law.cornell.edu/uscode/text/31/5318. (Last accessed December 12, 2013).
 http://www.law.cornell.edu/uscode/text/31/5322. (Last accessed December 12, 2013).
 The Money Laundering Suppression Act of 1994, Supra.
 U.S. General Accounting Office, “Anti Money Laundering Issues Concerning Depository Institution; Regulatory Oversight”, Supra.
 Waiver of Indictment. U.S. District Court in the District of Puerto Rico. USA v. Banco Popular de Puerto Rico. No. 03-017. (2003).
 http://www.justice.gov/opa/pr/2003/January/03_crm_024.htm. (Last accessed December 12, 2013).
 http://www.fincen.gov/news_room/ea/files/bancopopular.pdf. (Last accessed December 12, 2013).
 http://www.federalreserve.gov/BoardDocs/press/Enforcement/2000/20000309/default.htm. (Last accessed December 12, 2013).