NEW YORK -Broadway National Bank pleaded guilty yesterday to federal charges of failing to report more than $80 million in wire transfers that authorities suspect were drug trafficking proceeds.
The New York bank admitted that it didn't disclose transfers to Colombia, Pakistan, Lebanon, Panama and Miami from 1996 to 1998. Prosecutors said the privately held bank knew the transactions were drug-related. The bank denied that allegation.
U.S. District Judge Thomas Griesa imposed a $4 million fine.
The case may be the first filed against a bank for not establishing an anti-money-laundering program and for failing to file "Suspicious Activity" reports with regulators, prosecutors said. Banks must report any suspicious transactions and those over $10,000. As much as $500 billion is laundered through U.S. banks, brokerages, wire transfer companies and other businesses, authorities said.
"When you have a bank, even a small bank, you have to whack them hard," said Jack Blum, a former Senate investigator and now a Washington lawyer specializing in money laundering cases. "As a systematic matter, it's an incredibly important case."
Prosecutors said Broadway National didn't report $123 million in deposits. The bank admitted that it failed to disclose more than $80 million.
Authorities say Broadway National officials viewed the laundering business as a fast way for the bank to grow. The bank also admitted that employees helped structure deposits to avoid U.S. reporting laws.
"The services that BNB provided to criminal organizations were staggering in their audacity and their scope," said David Bonner, who heads the criminal investigation division of the Internal Revenue Service.
"For drug traffickers, profit is the bottom line," said Nelson Chen, special agent in charge of the El Dorado Task Force, an anti-money laundering operation jointly run by the U.S. Customs Service and the Internal Revenue Service.
Chen said the bank became the money laundering haven of choice for drug dealers and other criminals. Several told prosecutors that they chose Broadway National on the advice of colleagues.
"That was the word on the street," Chen said.
The bank was formed in 1986 by members of the Korean-American community and had $69 million in deposits in 1996, the time the criminal activity began, defense lawyer William Pollard said.
"The bank did not go out and solicit this business," Pollard told Griesa. "Since 1998, the bank is a different bank," with rigorous anti-laundering policies, he said.
Pollard admitted that the bank raised no questions when some of its customers made thousands of deposits into more than 100 separate accounts, sometimes in amounts just under $10,000. Within days, the money would be wired to Miami, the Middle East or South America, he said.
Broadway National has two Manhattan branches, where the crimes occurred, prosecutors said, and another office in Brooklyn.
The Broadway National investigation has resulted in several other convictions, including Alfred Dauber, who laundered $46 million through the bank while claiming he was in the "electronics business."
Broadway National failed to report suspicious activity by several of its customers, including Dauber, prosecutors said.
A "runner" for Dauber would routinely drop off duffel bags at the bank filled with more than $150,000 in cash on a single day, prosecutors said. The biggest one-day deposit was $660,000, they said.
Runners would leave before the money was counted, and tellers would use their lunch hour to tally it, prosecutors said.
"We will prosecute financial institutions such as Broadway that flagrantly disregard their duties under the Bank Secrecy Act," U.S. Attorney James Comey said in a statement.
A former executive with the Bank of New York Co. and her husband were charged in 1999 with laundering $7 billion from Russia through the bank, from 1995 to 1999. They pleaded guilty to federal charges.