February 26, 2016
The Financial Crimes Enforcement Network hit Coral Gables-based Gibraltar Private Bank & Trust with a $4 million penalty Thursday for willfully violating federal anti-money laundering (AML) laws, also known as the Bank Secrecy Act (BSA). That violation created deficiencies in Gibraltar’s systems that caused the bank to miss alerts related to Scott Rothstein’s $1.2 billion Ponzi scheme, according to the regulator.
FinCEN outlined three “significant red flags” that Gibraltar missed related to Rothstein’s and related accounts:
1.Rothstein conducted millions of dollars of transfers between bank accounts and between banks. The dollar amounts were large, round amounts within the same institution, which “is red flag activity indicative of a Ponzi scheme.”
2.There was unexplained transfer activity and payments with no links to legitimate services provided. Gibraltar should have noted that this sort of activity was not expected for the Rothstein accounts, the regulator said.
3.Multiple Interest on Trust Accounts (IOTAs) controlled by Rothstein were involved in a significant volume of “highly suspicious transactional activity” that did not match his profile, according to FinCEN. IOTA accounts are typically set up by an attorney to hold client funds and are not used to support ongoing transaction activity. Had Gibraltar applied appropriate scrutiny to Rothstein’s accounts, his improper use of IOTAs to support his massive Ponzi scheme would have identified as suspicious, FinCEN said.