Gibraltar bank warns of new regulatory enforcement action, fines over money laundering
Gibraltar Private Bank & Trust Co. warned its shareholders that federal regulators are seeking to hit the bank with a new enforcement action and civil monetary penalties, including against individual board members.
The Office of the Comptroller of the Currency and the U.S. Department of the Treasury are pursing these harsh civil measures because they’ve faulted the Coral Gables-based bank’s compliance with Bank Secrecy Act and anti-money laundering compliance laws, according to Gibraltar’s 2013 annual report to shareholders. This often refers to identifying customers and their source of funds and promptly reporting suspicious transactions to regulators.
Similar BSA/AML issues were the subject of a cease-and-desist order against Gibraltar in October 2010, and it appears regulators aren’t satisfied with the bank’s progress on those areas. In 2012, the bank settled several civil lawsuits from investors in jailed attorney Scott Rothstein’s Ponzi scheme who claimed that Gibraltar, where Rothstein banked and previously had an ownership stake, failed to notify regulators about his suspicious transactions.
One of Gibraltar’s key compliance officers recently left to rejoin Espirito Santo Bank.
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Gibraltar Chairman and CEO Adolfo Henriques declined to comment on any communications with regulators. Its annual report said the bank and its board members would be “providing information to support their belief that an enforcement action is not appropriate.”
When regulators notify banks that they intend to bring civil enforcement actions, the banks have the option to contest them in administrative court or settle the charges and agree to the order’s conditions. In most cases, a settlement is reached.
The $1.56 billion-asset bank’s annual report said it was notified by the OCC and Treasury about the potential enforcement actions in February. Miami Beach developer Russell W. Galbut resigned from its board on Feb. 28 due to other business obligations, according to the bank’s proxy statement. He has not been replaced.
The other Gibraltar board members are Henriques, David Kirkland, CMA Enterprise President and CEO Gail Birks, formerCarnival Cruise Lines President and CEORobert Dickinson, Comprehensive Cos. President Ronald G. Stone, Cisneros Corp. CEO Eduardo Cisneros and Dyke Industries Chairman James T. Dyke.
The annual report didn’t say which of Gibraltar’s board members regulators want to fine. Such a fine must be paid by the individual, not the bank.
It’s extremely rare for regulators to fine board members, although it happened locally in recent years with Miami-based Pacific National Bank and the failed Security Bank in North Lauderdale. Both of those cases involved noncompliance with a previous regulatory enforcement action. In the case of Pacific National Bank, the bank was fined, as well.
Miami-based bank analyst Kenneth H. Thomas said OCC head Thomas Curry has vowed to get more aggressive in dealing with BSA/AML compliance, including targeting bank board members and executives personally. Curry took over the OCC in 2012 and listened to the outrage of some members of Congress that year when HSBC executives weren’t held personally accountable after the bank settled allegations of allowing money laundering. Thomas said regulators have doubled down on BSA/AML enforcement.
It also hurts Gibraltar that it’s located in Miami, where regulators have targeted this issue, and the bank’s former regulator from the 2010 enforcement action, the Office of Thrift Supervision, was phased out in favor of the tougher OCC, Thomas said.
According to Gibraltar’s annual report, the restrictions on asset growth and asset quality from the 2010 order would be removed in the proposed new consent order, but it would require enhanced BSA/AML compliance and higher capital ratios. Most banks must maintain a Tier 1 leverage capital ratio of 5 percent and a total risk-based capital ratio of 10 percent to be “well capitalized,” but the proposed order would raise the bars for Gibraltar to 8 and 12 percent, respectively.
Gibraltar posted capital ratios of 8.06 and 13.12 percent on Dec. 31.
However, the bank’s annual report said the proposed enforcement action would automatically declare Gibraltar “adequately capitalized,” a status that makes it difficult to expand.
Thomas said the bank has made good progress on reducing its level of problem loans, and it has a leadership team with plenty of experience. Should it need more capital, he expects that its deep-pocketed investors would help it.