0001104659-07-059276.txt : 20070807 0001104659-07-059276.hdr.sgml : 20070807 20070806181116 ACCESSION NUMBER: 0001104659-07-059276 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20070806 ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20070807 DATE AS OF CHANGE: 20070806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN EXPRESS CO CENTRAL INDEX KEY: 0000004962 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 134922250 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07657 FILM NUMBER: 071029070 BUSINESS ADDRESS: STREET 1: 200 VESEY STREET STREET 2: 50TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10285 BUSINESS PHONE: 2126402000 MAIL ADDRESS: STREET 1: 200 VESEY STREET STREET 2: 50TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10285 8-K 1 a07-21089_28k.htm 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 6, 2007

AMERICAN EXPRESS COMPANY

(Exact name of registrant as specified in its charter)

New York	1-7657	13-4922250
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of incorporation		Identification No.)
or organization)

200 Vesey Street, World Financial Center
New York, New York		10285
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 640-2000

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01 Regulation FD Disclosure

As described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, in recent years, U.S. and foreign regulatory authorities, together with international organizations, have raised increasing concerns over the ability of criminal organizations and corrupt persons to use global financial intermediaries to facilitate money laundering. Compliance efforts to combat money laundering remain a high priority for the Company and its subsidiaries, including American Express Bank Ltd. (“AEBL”) and American Express Travel Related Services Company, Inc. (“TRS”), and they have increased their efforts to address evolving regulatory and supervisory standards and requirements in jurisdictions in which they do business.

As previously disclosed, in early 2004, American Express Bank International (“AEBI”), a subsidiary of AEBL headquartered in Miami, received subpoenas from the Department of Justice (“DOJ”) relating to certain customer accounts and anti-money laundering (“AML”) compliance programs. In September 2006, the DOJ informed AEBI of concerns relating to its AML compliance program. In addition, in 2007, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Financial Crimes Enforcement Network (“FinCEN”) of the Department of Treasury informed AEBI of potential enforcement actions relating to its AML programs. Also, in June 2007, FinCEN informed TRS that it separately had concerns relating to TRS’s compliance with the provisions of the Bank Secrecy Act regarding the filing of Suspicious Activity Reports in connection with its travelers check business.

On August 6, 2007, AEBI entered into a settlement with the DOJ, the Federal Reserve and FinCEN relating to deficiencies in its AML program. As part of the settlement, AEBI entered into a Deferred Prosecution Agreement with the DOJ, a Cease and Desist Order with the Federal Reserve and a Consent Order with FinCEN, each of which provides for a money penalty. The Consent Order with FinCEN also resolves FinCEN’s determination that TRS did not file timely, accurate and complete Suspicious Activity Reports.

The Company will pay a total of $65 million in settlement of all these matters. Of the amount to be paid, $60 million is attributable to the matters involving AEBI and $5 million is attributable to the matter involving TRS. The DOJ assessed a $55 million payment under the Deferred Prosecution Agreement. FinCEN assessed a civil money penalty in the amount of $25 million under its Consent Order, $15 million of which is concurrent with the DOJ payment and is therefore deemed satisfied by the payment to be made to the DOJ, with the remaining $10 million assessed under the FinCEN Consent Order to be paid to the Department of the Treasury. The Federal Reserve assessed a civil money penalty in the amount of $20 million under its Cease and Desist Order, which is concurrent with the penalty assessed by the DOJ and FinCEN and is likewise therefore deemed satisfied by the payments to the DOJ and the Department of the Treasury.

During the first quarter of 2007, the Company established a reserve in the amount of $60 million for regulatory and legal matters at AEBI. The Company increased the reserve during the second quarter of 2007 for the resolution of the matters.

Under the Deferred Prosecution Agreement, the DOJ will file an information in the U.S. District Court for the Southern District of Florida charging AEBI with violating the Bank Secrecy Act by failing to maintain an effective anti-money laundering program. This charge will be deferred, and absent a breach of the agreement, will be dismissed after 12 months or such earlier time as described in the Deferred Prosecution Agreement, and no further prosecution relating to these matters will be brought. The Federal Reserve’s Cease and Desist Order also requires that AEBI implement certain remedial measures, which are presently underway.

Also on August 6, 2007, AEBL entered into a Written Agreement with the New York State Banking Department, the primary regulator of AEBL, under which AEBL has agreed to implement certain enhancements and remedial measures to its AML compliance program. There is no monetary fine or penalty associated with this Agreement.

In addition to resolving each of the above proceedings, the Company has committed to its consolidated supervisor, the Office of Thrift Supervision (“OTS”), that it will complete its efforts to develop and implement an enterprise wide AML compliance program that will govern compliance throughout the American Express organization, and will ensure that each of its subsidiaries is provided with resources adequate to meet its legal and regulatory obligations. The Company will report periodically on its progress to the OTS.

A copy of each of the Deferred Prosecution Agreement with the DOJ, the Cease and Desist Order with the Federal Reserve, the Assessment of Civil Money Penalty by FinCEN and the Written Agreement with the NYSBD is attached to this report as Exhibits 99.1, 99.2, 99.3 and 99.4, respectively, and each is hereby incorporated by reference.

Exhibit

99.1	Deferred Prosecution Agreement, dated August 6, 2007, between American Express Bank International and the United States Department of Justice, Criminal Division (including Factual Statement in connection therewith).

99.2	Cease and Desist Order and Order of Assessment of a Civil Money Penalty, effective August 6, 2007, of the Board of Governors of the Federal Reserve System.

99.3	Assessment of Civil Money Penalty by the Financial Crimes Enforcement Network of the United States Department of the Treasury.

99.4	Written Agreement, dated August 6, 2007, between American Express Bank Ltd. and the New York State Banking Department.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		AMERICAN EXPRESS COMPANY
		(REGISTRANT)

		By:	/s/ Stephen P. Norman
			Name: Stephen P. Norman
			Title: Secretary

Date:	August 6, 2007

EXHIBIT INDEX

Exhibit No.		Description

99.1		Deferred Prosecution Agreement, dated August 6, 2007, between American Express Bank International and the United States Department of Justice, Criminal Division (including Factual Statement in connection therewith).

99.2		Cease and Desist Order and Order of Assessment of a Civil Money Penalty, effective August 6, 2007, of the Board of Governors of the Federal Reserve System.

99.3		Assessment of Civil Money Penalty by the Financial Crimes Enforcement Network of the United States Department of the Treasury.

99.4		Written Agreement, dated August 6, 2007, between American Express Bank Ltd. and the New York State Banking Department.

EX-99.1 2 a07-21089_2ex99d1.htm EX-99.1

Exhibit 99.1

UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA

	)
UNITED STATES OF AMERICA,	)
Plaintiff,	)
	)	No.
v.	)
	)
AMERICAN EXPRESS BANK	)
INTERNATIONAL,	)	DEFERRED PROSECUTION
	)	AGREEMENT
Defendant,	)
	)

Defendant American Express Bank International (“AEBI”), an Edge Act Corporation, by and through its attorneys, Debevoise & Plimpton LLP, pursuant to authority granted by its Board of Directors, and the United States Department of Justice, Criminal Division (hereinafter, “the United States”), enter into this Deferred Prosecution Agreement (the “Agreement”).

1. AEBI shall waive indictment and agree to the filing of a ONE (1) count information in the United States District Court for the Southern District of Florida, Miami, charging it with failing to maintain an effective anti-money laundering program, in violation of Title 31, United States Code, Sections 5318(h)(1) and 5322(a).

2. AEBI accepts and acknowledges responsibility for the conduct of its employees as set forth in the Factual Statement attached hereto and incorporated by reference herein as Appendix A (hereinafter, “Factual Statement”).

3. AEBI expressly agrees that it shall not, through its attorneys, board of directors, agents, officers or employees, make any public statement contradicting any statement of fact

contained in the Factual Statement. Any such contradictory public statement by AEBI, its attorneys, board of directors, agents, officers or employees, shall constitute a breach of this Agreement as governed by Paragraph 12 of this Agreement, and AEBI would thereafter be subject to prosecution pursuant to the terms of this Agreement. The decision of whether any statement by any such person contradicting a fact contained in the Factual Statement will be imputed to AEBI for the purpose of determining whether AEBI has breached this Agreement shall be in the sole and reasonable discretion of the United States. Upon the United States’ notification to AEBI of a public statement by any such person that in whole or in part contradicts a statement of fact contained in the Factual Statement, AEBI may avoid breach of this Agreement by publicly repudiating such statement within 48 hours after notification by the United States. This paragraph is not intended to apply to any statement made by any individual in the course of any criminal, regulatory, or civil case initiated by a governmental or private party against such individual. In addition, consistent with AEBI’s obligation not to contradict any statement of fact set forth in Appendix A, AEBI may take good faith positions in litigation involving any private party.

4. AEBI agrees that it, in accordance with applicable laws: (a) shall provide to the United States, on request, any relevant document, electronic data, or other object concerning matters relating to this investigation in AEBI’s possession, custody and/or control. Whenever such data is in electronic format, AEBI shall provide access to such data and assistance in operating computer and other equipment as necessary to retrieve the data. This obligation shall not include production of materials covered by the attorney-client privilege or the work product doctrine; and (b) shall in all material aspects completely, fully and timely comply with all legal

obligations, record keeping and reporting requirements imposed upon it by the Bank Secrecy Act, 31 U.S.C. §§ 5311 through 5330 and all Bank Secrecy Act implementing regulations.

5. The United States has determined that it could institute a criminal or civil forfeiture action against certain funds laundered through certain accounts. AEBI further acknowledges that in excess of $55,000,000.00 may have been involved in transactions in accounts in violation of Title 18, United States Code, Sections 1956, 1957, and 1960 and, therefore at least some or all funds deposited in such accounts could be forfeitable to the United States pursuant to Title 18, United States Code, Sections 981 and 982. AEBI recognizes that in lieu of the United States instituting a civil or criminal forfeiture action against at least certain of those funds, it hereby expressly agrees to settle and does settle any and all civil and criminal forfeiture claims presently held by the United States against those funds for the sum of $55,000,000.00.

6. In consideration of AEBI’s remedial actions to date and its willingness to: (i) acknowledge responsibility for the conduct of its employees as detailed in the Factual Statement; (ii) continue its cooperation with the United States; (iii) demonstrate its future good conduct and full compliance with the Bank Secrecy Act and all of its implementing regulations, including, but not limited to, the remedial actions itemized in Paragraph 9 below; and (iv) settle any and all civil and criminal claims currently held by the United States, its agencies, and representatives against the funds referred to in Paragraph 5 above for the sum of $55,000,000.00, the United States shall recommend to the Court, pursuant to 18 U.S.C. § 3161(h)(2), that prosecution of AEBI on the Information filed pursuant to Paragraph 1 be deferred for a period of twelve (12) months. AEBI shall consent to a motion, the contents to be agreed by the parties, to be filed by the United States with the Court promptly upon execution of this Agreement, pursuant to 18 U.S.C. § 3161(h)(2), in which the United States will present this Agreement to the Court and

move for a continuance of all further criminal proceedings, including trial, for a period of twelve (12) months, for speedy trial exclusion of all time covered by such a continuance, and for approval by the Court of this deferred prosecution. AEBI further agrees to waive and does hereby expressly waive any and all rights to a speedy trial pursuant to the Sixth Amendment of the United States Constitution, Title 18, United States Code, Section 3161, Federal Rule of Criminal Procedure 48(b), and any applicable Local Rules of the United States District Court for the Southern District of Florida for the period that this Agreement is in effect.

7. AEBI hereby further expressly agrees that any violations of the federal money laundering laws and/or the Bank Secrecy Act pursuant to 18 U.S.C. §§ 1956, 1957, 1960 and 31 U.S.C. §§ 5313, 5318 and 5322, that were not time-barred by the applicable statute of limitations as of the date of this Agreement, either by statute or any previously executed Tolling Agreement, the terms of which are hereby incorporated into this Agreement, may, in the sole reasonable discretion of the United States, be charged against AEBI within six (6) months of any breach of this Agreement, or any event which renders this Agreement null and void, notwithstanding the expiration of any applicable statute of limitations.

8. The United States agrees that if AEBI is in full compliance with all of its obligations under this Agreement, the United States, within thirty (30) days of the expiration of the time period set forth in Paragraph 6 above, shall seek dismissal with prejudice of the information filed against AEBI pursuant to Paragraph 1 and this Agreement shall expire and be of no further force or effect. Notwithstanding the preceding sentence, the parties agree that if AEBI’s business operations are sold to a party or parties unaffiliated with AEBI as of the date hereof, whether by sale of stock, merger, consolidation, sale of a significant portion of its assets, or other form of business combination, or otherwise undergoes a direct or indirect change of control within the

term of this Agreement, the Information shall be dismissed with prejudice and all other obligations of AEBI under this Agreement, other than the obligations set forth in paragraph 4(a), shall terminate upon the closing of any such transaction or the occurrence of such change of control.

9. AEBI has agreed to implement certain remedial measures designed to fully comply with the Bank Secrecy Act, including but not limited to, the terms and conditions of the Board of Governors of the Federal Reserve System’s Cease and Desist Order and Order of Assessment of Civil Money Penalty Issued Upon Consent Pursuant to the Federal Deposit Insurance Act, as Amended, Docket Number 07-017-B-EC, and the Department of the Treasury, Financial Crimes Enforcement Network’s Consent to the Assessment of Civil Money Penalty, No. 2007-1, the terms of which are hereby fully incorporated into this Statement of Facts and related Deferred Prosecution Agreement, as they relate to AEBI.

10. AEBI and the United States understand that the Agreement to defer prosecution of AEBI must be approved by the Court, in accordance with 18 U.S.C. § 3161(h)(2). Should the Court decline to approve a deferred prosecution for any reason, both the United States and AEBI are released from any obligation imposed upon them by this Agreement and this Agreement shall be null and void.

11. Should the United States determine during the term of this Agreement that AEBI has committed any federal crime commenced subsequent to the date of this Agreement, AEBI shall, in the sole reasonable discretion of the United States, thereafter be subject to prosecution for any federal crimes of which the United States has knowledge. Except in the event of a breach of this Agreement, the parties agree that all criminal investigations arising from: (a) the facts contained in, connected to, or involving the accounts described in the Factual Statement; (b) other accounts

that were the subject of grand jury subpoenas in the course of this investigation, as well as AEBI’s efforts to comply with grand jury subpoenas issued in the course of the investigation; and (c) AEBI’s AML/BSA compliance program, including AEBI’s compliance with the BSA’s suspicious activity reporting requirements, that have been, or could have been, conducted by the United States prior to the date of this Agreement, shall not be pursued further as to AEBI or any of its parents, affiliates, successors, or related companies, and that the United States will not bring any additional charges against AEBI or any of its parents, affiliates, successors, or related companies, relating to these matters.

12. Should the United States determine that AEBI has committed a willful and material breach of any provision of this Agreement, the United States shall provide written notice to AEBI of the alleged breach and provide AEBI with a two-week period, or longer at the reasonable discretion of the Assistant Attorney General in charge of the Criminal Division, in which to make a presentation to the Assistant Attorney General to demonstrate that no breach has occurred or, to the extent applicable, that the breach is not willful or material or has been cured. The parties hereto expressly understand and agree that should AEBI fail to make a presentation to the Assistant Attorney General within such time period, it shall be presumed that AEBI is in willful and material breach of this Agreement. The parties further understand and agree that the Assistant Attorney General’s exercise of reasonable discretion under this paragraph is not subject to review in any court or tribunal outside of the Department of Justice. In the event of a breach of this Agreement which results in a prosecution, such prosecution may be premised upon any information provided by or on behalf of AEBI to the United States at any time, unless otherwise agreed when the information was provided.

13. AEBI agrees that, if AEBI’s business operations are sold to a party or parties unaffiliated with AEBI as of the date hereof, whether by sale of stock, merger, consolidation, sale of a significant portion of its assets, or other form of business combination, or otherwise undergoes a direct or indirect change of control within the term of this Agreement, AEBI shall include in any contract for sale or merger a provision binding the purchaser/successor to the obligations described in Paragraph 4(a) of this Agreement regarding cooperation with the Department of Justice.

14. It is further understood that this Agreement is binding on AEBI and the United States Department of Justice, but specifically does not bind any other federal agencies, or any state or local authorities, although the United States will bring the cooperation of AEBI and its compliance with its other obligations under this Agreement to the attention of state or local prosecuting offices or regulatory agencies, if requested by AEBI or its attorneys.

15. It is further understood that this Agreement does not relate to or cover any criminal conduct by AEBI other than the conduct or accounts described in paragraph 11.

16. AEBI and the United States agree that, upon acceptance by the Court, this Agreement and an Order deferring prosecution shall be publicly filed in the United States District Court for the Southern District of Florida.

17. This Agreement sets forth all the terms of the Deferred Prosecution Agreement between AEBI and the United States. No promises, agreements, or conditions shall be entered into and/or are binding upon AEBI or the United States unless expressly set forth in writing, signed by the United States, AEBI’s attorneys, and a duly authorized representative of AEBI. This Agreement supersedes any prior promises, agreements or conditions between AEBI and the United States.

Acknowledgments

I, Simon E. Amich, the duly authorized representatives of American Express Bank International, hereby expressly acknowledge the following: (1) that I have read this entire Agreement; (2) that I have had an opportunity to discuss this Agreement fully and freely with American Express Bank International’s attorneys; (3) that American Express Bank International fully and completely understands each and every one of its terms; (4) that American Express Bank International is fully satisfied with the advise and representation provided to it by its attorneys; and (5) that American Express Bank International has signed this Agreement voluntarily.

		American Express Bank International


August 6, 2007		/s/ Simon E. Amich
DATE		SIMON E. AMICH
		President & Chief Executive Officer
		American Express Bank International

Counsel for the American Express Bank International

The undersigned are outside counsel for AEBI. In connection with such representation, we acknowledge that: (1) we have discussed this Agreement with our client; (2) that we have fully explained each one of its terms to our client; (3) that we have fully answered each and every question put to us by our client regarding the Agreement; and (4) we believe our client completely understands all of the Agreement’s terms.


August 6, 2007		/s/
DATE		MARY JO WHITE
		BRUCE E. YANNETT
		ANDREW J. CERESNEY
		Debevoise & Plimpton LLP
		Attorneys for American Express Bank International

On Behalf of the Government

		ALICE FISHER
		Assistant Attorney General, Criminal Division
		United States Department of Justice

August 6, 2007		/s/ Richard Weber
DATE	By:	RICHARD WEBER, Chief
		Asset Forfeiture and Money Laundering Section
		U.S. Department of Justice, Criminal Division


August 6, 2007		/s/ John W. Sellers
DATE	By:	JOHN W. SELLERS
		Trial Attorney
		Asset Forfeiture and Money Laundering Section
		U.S. Department of Justice, Criminal Division


August 6, 2007		/s/ Thomas J. Pinder
DATE	By:	THOMAS J. PINDER
		Trial Attorney
		Asset Forfeiture and Money Laundering Section
		U.S. Department of Justice, Criminal Division

Factual Statement

1. American Express Bank International (AEBI) is an Edge Act Corporation, whose primary business activity is the provision of private banking services to wealthy Latin American clients. AEBI has total assets of approximately $1 billion. The Federal Reserve Bank of Atlanta regulates AEBI. AEBI was originally headquartered in New York, New York, and in June 1985, opened a branch office in Miami, Florida. In or about July 1997, AEBI’s headquarters were relocated from New York to Miami.

2. The Bank Secrecy Act (“BSA”), 31 U.S.C. § 5311 et seq., and its implementing regulations, which Congress enacted to address an increase in criminal money laundering activities utilizing financial institutions, require domestic banks, insured banks and other financial institutions to maintain programs designed to detect and report suspicious activity that might be indicative of money laundering, terrorist financing and other financial crimes, and to maintain certain records and file reports related thereto that are especially useful in criminal, tax or regulatory investigations or proceedings.

3. The U.S. Department of Justice, Criminal Division, Asset Forfeiture and Money Laundering Section, and the U.S. Drug Enforcement Administration, have determined that from December 1999 through April 2004, American Express Bank International wilfully violated the anti-money laundering requirements of the Bank Secrecy Act (BSA) and its implementing regulations. The violations at AEBI were serious and systemic and allowed millions of dollars of financial transactions involving proceeds from the sale of illegal narcotics to be conducted by others through AEBI accounts.

4. Investigators have identified specific accounts AEBI accounts (hereinafter referred to as “the Targeted Accounts”) which they believe were used to launder more than $55 million of drug proceeds by and through the “Black Market Peso Exchange,” the mechanics of

United States v. American Express Bank International
Deferred Prosecution Agreement Factual Statement

which are explained further below. In addition to the Targeted Accounts, investigators identified numerous other AEBI private banking accounts that were controlled by apparently legitimate South American businesses, but held in the names of offshore shell corporations and used to process “parallel currency exchange market” transactions originating from South America. South American parallel currency exchange markets are saturated with drug proceeds and represent a high risk of money laundering to financial institutions around the world, particularly U.S. based financial institutions. Despite knowing of this risk, AEBI personnel allowed certain customers to use accounts at AEBI to process such transactions even though the bank had little ability to monitor or control the transactions in these accounts.

The “Black Market Peso Exchange” and
Drug Money Laundering through Parallel Currency Exchange Markets

5. The Black Market Peso Exchange (“BMPE”) is a trade-based money laundering system through which South American “money brokers” facilitate a non-regulated currency exchange of United States dollars for local South American currency. The money broker stands between South American drug cartels on one side, and South American importers on the other. The drug cartels, particularly in Colombia, hold large quantities of United States dollars –derived from retail drug trafficking in the United States – that they need to convert into local currency (i.e., Colombian pesos) for their illicit use in South America. On the other side, South American businesses often require United States dollars to pay for imported goods or services, but to avoid government scrutiny, import duties, sales and income taxes, red tape, and the often less-favorable exchange rates associated with the official currency exchange mechanisms, they seek to purchase these dollars from an “unregulated exchange.”

6. Under Colombian foreign exchange laws, a Colombian who needs to purchase United States currency to pay for imports is legally required to do this through the “regulated” or “formal” currency exchange market. Accordingly, non-financed, United States dollar payments for goods imported into Colombia must occur by one of three methods: (1) transactions through Colombian financial institutions regulated by the Banco de la República; (2) transactions through formal currency exchange houses licensed by the Superintendencia Bancaria to engage in international currency transfers; or (3) transactions from a dollar denominated account at a foreign bank, called a “Cuenta Corriente de Compensación” (current compensation account) that is registered in the importer’s name with the Banco de la República.

7. All dollar payments for imported goods on the formal exchange market are supposed to be reported to the Banco de República and the Direccion de Impuestos y Aduanas Nacionales (“DIAN”), which is the Colombian customs and taxing authority. The legitimacy of all payments for all import goods is corroborated through formal declarations that must be filed with the banks and are forwarded to the DIAN. In theory, these declarations should match, dollar for dollar, the declared value of the imported goods, as stated on the Colombian customs entry documents for those goods, which are also retained by the DIAN. Although Colombians can legally purchase United States currency on the so called “non-regulated,” “free,” or “parallel” currency exchange market for such things as personal use, travel, and minor personal investments, they cannot use the parallel exchange market to purchase United States dollar payments for imported goods.

8. That Colombian businesses are required to use the formal currency exchange market for import and export activities is common knowledge in Colombia. Nonetheless, these

legal requirements are often circumvented by businesses which, for the most part, introduce goods into Colombia by under-reporting the true value of imported goods or by importing the goods into Colombia without reporting them. These Colombian businesses usually have to pay for their goods with United States dollars, but they obtain such dollars on the parallel exchange market, thereby avoiding the reporting requirements of the formal exchange market and disguising the evasion of customs duties, sales taxes, and income taxes. The portion of the parallel exchange market that caters to this is referred to as the “black” currency exchange market for two reasons. First, they are designed to promote and disguise these widespread smuggling operations and the related tax evasion. Second, a significant source of “unregulated” dollars in Colombia and other South American countries is drug trafficking. That dollar payments for smuggled goods in South American countries originates primarily from drug trafficking activity is common knowledge in Colombia, and other Latin America and Carribean countries.

9. Having set forth the reasons why imported goods and foreign services are often paid for with drug proceeds, the next step is to explain how those drug proceeds end up in the United States banking system, ultimately transferred to bank accounts of United States exporters and other entities that sell goods and services in South America (typical BMPE accounts) or, in a somewhat different BMPE scheme, routed to personal savings and investment accounts held in the United States by South Americans (flight capital accounts, generally held in the names of offshore shell corporations).

10. In the typical BMPE currency exchange transaction, a BMPE money broker meets with Colombian drug traffickers who hold large amounts of retail drug proceeds in the

form of United States dollars in the United States and other places. These drug proceeds may be waiting in stash-houses or have already been laundered into the United States financial system by the drug trafficking organizations. The BMPE broker agrees to purchase drug dollars from the drug traffickers with Colombian pesos at a heavily discounted exchange rate. The BMPE broker then finds Colombian or other South American customers – usually businesses that seek United States dollars to pay for imports or other foreign services – and sells the Colombian or South American customers the right to use the drug dollars. The BMPE broker may also sell those dollars to South Americans seeking to maintain U.S. dollar investments in the United States and elsewhere outside their home countries. In either case, the broker negotiates a dollar/peso exchange rate with his Colombian and South American customers at rates lower than the formal currency exchange market rates, but higher than the broker paid for the dollars. The Colombian and South American customers inform the broker where the United States dollars purchased need to be delivered. This information is passed on to a money laundering organization in the United States or elsewhere that executes the delivery.

11. In the typical BMPE transaction, the purchased drug proceeds will be wire transferred to the specific bank account of a United States or foreign company that sold goods or services to the broker’s Colombian or South American customer. Once the United States dollars are delivered to their United States or foreign destination, the broker gives his Colombian or other South American customers proof the dollars were sent (e.g., copies of the United States dollar wire transfer requests or confirmations). The Colombian or other South American customers pay the broker the equivalent in Colombian pesos at the previously negotiated exchange rate. In turn, the broker transfers any pesos he receives from his customers to the drug

trafficking organization that sold him the United States dollars, and the broker retains the profit he made on the exchange transactions.

12. Thus, without using any formal currency exchange mechanism, drug cartels exchange the drug dollars they own in the United States and elsewhere for Colombian pesos or other South American currency that they can spend in South America (thereby avoiding the risks associated with smuggling the drug dollars out of the U.S. and converting the dollars to pesos). On the other side of the transaction, again without using any formal currency exchange mechanism, Colombian or other South American businesses and individuals exchange pesos for United States dollar payments that originate in the United States to pay for the purchase of goods imported into Colombia or other South American countries, services from foreign companies, or to fund personal investment accounts in the United States or elsewhere, without having to pay taxes or be subject to government scrutiny.

BMPE Transactions at AEBI

13. AEBI knowingly allowed South American customers to use accounts at the bank to process parallel currency exchange market transactions, many of which turned out to be BMPE transactions. Both types of accounts (traditional BMPE accounts and flight capital accounts held in offshore corporate names) were characterized by the same type of suspicious incoming funds transfers: dozens, sometimes hundreds, of sources of incoming funds (typically wire transfers) from persons and entities completely unrelated to the account holder. In many cases, the financial transactions were inconsistent with the nature of the account holder’s business as understood by bank personnel. A large amount of funds were received into the accounts under circumstances suggesting they were drug proceeds. In addition, hundreds of

thousands of dollars of drug proceeds were transferred to the Targeted Accounts directly from law enforcement agents, who in an undercover capacity, were “working for” Colombian money brokers and drug traffickers.

Anti Money Laundering and Bank Secrecy Act Requirements

14. Pursuant to Title 31, United States Code, Section 5318(h)(1) and 12 C.F.R. § 211.5(m)(1), AEBI is required to establish and maintain an anti-money laundering (AML) compliance program that, at a minimum: (a) provides internal policies, procedures, and controls designed to guard against money laundering; (b) provides for an individual or individuals to coordinate and monitor day-to-day compliance with the BSA and AML requirements; (c) provides for an ongoing employee training program; and (d) provides for independent testing for compliance conducted by bank personnel or an outside party. Fundamental laws establishing anti-money laundering obligations of banking organizations in the United States include the Bank Secrecy Act (“BSA”), 31 U.S.C. § 5311 et seq.; the Money Laundering Control Act of 1986 (codified in relevant part at 18 U.S.C. §§ 1956 and 1957); and the USA PATRIOT Act of 2001, which significantly amended both laws and extended an anti-money laundering program requirement beyond federally insured deposit institutions to all types of financial institutions.

15. AEBI’s location in South Florida has been designated a High Intensity Drug Trafficking Area, and AEBI provides private banking services to high net worth individuals living in Latin America, a region known as a source for illegal narcotics. Therefore, AEBI is operating under a high-risk of money laundering. Although AEBI is subject to the same laws and regulations under the Bank Secrecy Act as other domestic banks, it is required to use enhanced diligence with respect to the products and services it provides to its unique customer

base.

16. The Bank Secrecy Act specifically requires banks, including AEBI, to file with the Department of Treasury and, in some cases, appropriate Federal law enforcement agencies, a Suspicious Activity Report (“SAR”), in accordance with the form’s instructions, when the type of activity described in Paragraphs 4 through 13 above is detected. See 31 U.S.C. § 5318(g), 31 C.F.R. § 103.18, and 12 C.F.R. § 211.5k. The requirement became effective on April 1, 1996. According to the form’s instructions, AEBI was required to file a SAR with the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”), reporting any transaction conducted or attempted by, at, or through the bank, if it involved or aggregated at least $5,000 in funds or other assets, and the bank knew, suspected, or had reason to suspect that:

(i) The transaction involved funds derived from illegal activities or was intended or conducted in order to hide or disguise funds or assets derived from illegal activities (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any federal law or regulation or to avoid any transaction reporting requirement under federal law or regulation.

(ii) The transaction was designed to evade any requirements promulgated under the Bank Secrecy Act.

(iii) The transaction had no business or apparent lawful purpose or was not the sort in which the particular customer would normally be expected to engage, and the bank knew of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.

17. The investigation into this matter has determined that the primary cause of

AEBI’s failure to identify, prevent and report the activity described in Paragraphs 4-13 is that, at least through April 12, 2004, AEBI’s Anti-Money Laundering (AML) program contained serious and systemic deficiencies in critical areas required by the Bank Secrecy Act and its implementing regulations. The following summarizes the serious and systemic deficiencies uncovered through this investigation:

· AEBI failed to exercise sufficient control over accounts held in the names of offshore bearer share corporations, and until 2004 had no policy or procedure requiring beneficial owners of such accounts to certify in writing their continued ownership of the bearer shares.

· AEBI failed to conduct a risk assessment of its operations until 2002, and consequently was unable to and did not identify and monitor its highest-risk banking products and transactions.

· AEBI failed to develop and maintain an account monitoring program that was adequately designed to identify, detect, report and prevent suspicious activities.

· AEBI failed to monitor adequately the source of funds sent to customer accounts to identify suspicious activities.

· AEBI failed to independently verify information on clients provided by private bank relationship managers.

· AEBI failed to provide compliance personnel with authority to identify and prevent suspicious and high-risk banking activities.

· AEBI failed to maintain an audit program reasonably designed to ensure the bank’s compliance with BSA / AML laws and regulations.

1994 Department of Justice Settlement Agreement

18. In 1994, AEBI was involved in a significant money laundering case and consequently operates under the background of a Department of Justice Settlement Agreement. On November 18, 1994, AEBI entered into a Settlement Agreement with the Department of Justice relating to the Bank’s compliance with the Bank Secrecy Act and anti-money laundering regulations and statutes. The settlement grew out of a related indictment and conviction in June 1994 of two of AEBI’s employees as a result of a U.S. Customs Service investigation into cartel leader Juan Garcia Abrego.(1) This Settlement Agreement also followed a Cease and Desist Order and Civil Penalty between AEBI and the Federal Reserve dated November 1, 1993. As part of the Settlement, the Department of Justice withdrew and dismissed a civil money laundering complaint it filed against AEBI and did not file criminal charges against the bank. AEBI also agreed to a substantial monetary penalty, comprised of the withdrawal of AEBI’s claim to a $30 million client account that served as collateral for $19 million in AEBI loans, the forfeiture of $7 million, a $7 million penalty, and the bank’s agreement to spend no less than $3 million on the development and implementation of policies, procedures, and training in order to assure compliance with the government’s BSA/AML regulations and statutes.

19. The enhanced compliance requirement of the Settlement Agreement focused on the weaknesses in standard procedures for screening new clients. The Settlement Agreement broadly required AEBI to:

· implement an enhanced AML and BSA compliance program;

(1) United States v. Aguirre-Villagomez, et al., United States v. Giraldi, 86 F.3d 1368 (5th Cir. 1996); United States v. Castaneda-Cantu, 20 F.3d 1325 (5th Cir. 1994).

· expend $3 million on the development and implementation of policies, procedures, training and audit;

· retain independent consultants to conduct a thorough review of AEBI’s compliance program;

· promote a fully functioning and adequately staffed compliance program, with specific emphasis on:

· implementation of policies, procedures, and programs designed to ensure conformity to the requirements of the Bank Secrecy Act and the money laundering statutes;

· improvement of the bank’s “know your client” policies and procedures;

· training of all employees of AEBI on a regular basis on the Bank Secrecy Act and the money laundering statutes, and the “know your client” policies of AEBI; and

· evaluation of the sufficiency of existing internal audit and control procedures for identifying possible violations of the Bank Secrecy Act, the money laundering statutes, and the “know your client” policies of AEBI.

Significant Bank Secrecy Act Program Failures at AEBI

Know Your Customer Deficiencies

20. Compliance with the SAR reporting requirements of the Bank Secrecy Act necessitates an integrated Know Your Customer Program (KYC Program). An integrated KYC Program necessarily forms the heart of any adequate anti-money laundering program. The Federal Reserve has advised banks, including AEBI, that an effective KYC program should incorporate the following principles into the association’s business practices:

a. Determine the true identity of all customers requesting services;

b. Determine the customer’s source(s) of funds for transactions;

c. Determine the particular customer’s normal and expected transactions;

d. Monitor customer transactions to determine if they are consistent with the normal and expected transactions for that customer or for similar categories or classes of customers;

e. Identify customer transactions that do not appear to be consistent with normal and expected transactions for that particular customer or for customers in similar categories or classes; and

f. Determine if a transaction is unusual or suspicious and, if so, report those transactions.

Bearer Share Corporate Accounts

21. Almost all of the Targeted Accounts of AEBI shared the characteristic of being held in the names of “bearer share corporations” incorporated in offshore jurisdictions, such as the British Virgin Islands (BVI). Bearer share corporations are owned by the person or entity holding, or “bearing,” the unregistered corporate common stock. There are no formal procedures for transferring ownership of a bearer share corporation’s stock certificates to another, and linking any person to such a corporation is difficult. Accordingly, professional money launderers and other criminals frequently use such corporations to open offshore and domestic bank accounts to deposit illicit money. Bearer share structures make it extremely difficult for banks (and law enforcement) to know the actual owners of accounts and to satisfy the Know Your Customer requirements. One example amongst the Targeted Accounts at AEBI was an account controlled by a Colombian national, but held in the name of an offshore (BVI) bearer share corporation, which was in turn controlled by three other bearer share corporations, which in turn had given the Colombian national a power of attorney, authorizing him to control the financial affairs and bank accounts of the original bearer share corporation. This individual processed millions of dollars in what appear to be BMPE transactions through AEBI accounts.

22. In addition to the Targeted Accounts, the Bank had numerous other accounts held in the names of offshore shell corporations, many controlled through bearer shares. Many of these accounts were beneficially owned and controlled by supposedly legitimate corporations in South America. There are few, if any, legitimate reasons why an established business concern would need or want to conduct financial transactions through secret accounts held in the names of offshore shell corporations. Yet, law enforcement has found that the presence of such accounts is endemic to international private banking in the United States, including at AEBI.

AML Risk Assessment

23. Because of AEBI’s location in South Florida, a designated High Intensity Drug Trafficking Area, and its provision of private banking services to high net worth individuals living in Central and South America, a region known as a source for illegal narcotics, AEBI is considered to be operating under a high risk of money laundering. Yet no bank of substantial size can possibly monitor every single transaction and every single account. Thus, most banks conduct a formal and detailed risk assessment of each of its products, transactions, services, geographic locations, etc., and then tailor their limited AML and BSA resources to specifically monitor and control those areas identified as the highest risk.

24. Prior to May 2002, AEBI did not conduct a risk assessment of its operations and products and consequently failed to identify high-risk areas for enhanced monitoring. Based on the high risk of both Private Banking and the country risk associated with a large majority of AEBI’s clientele, some type of risk assessment is expected as a regulatory and supervisory matter.

Activity Monitoring

25. Prior to 2004, AEBI relied upon a proprietary software system, called the Client Activity Monitoring System or “CAMS,” to monitor accounts for suspicious activity. Yet CAMS was only capable of identifying accounts that had breached preset parameters for external debits and total holdings, not for identifying suspicious activity patterns.

26. The bank’s written KYC policies and procedures set out a clear expectation that bank employees assess their client’s transactions and ensure that those transactions remain consistent with the client’s usual business and activities and make economic sense based on their knowledge of the client’s source of wealth and use of funds. To that end, AEBI Relationship Managers (RM’s) were tasked with conducting a monthly review of the activity occurring in all transaction accounts under their management using Activity Analysis Reports and Activity Detail Reports distributed by Compliance with the goal of identifying any activity which appeared to be out of pattern for the client or which required additional investigation. However, law enforcement identified a number of examples of red flag activity or suspicious activity that was unmonitored and unquestioned by AEBI, particularly with respect to the questionable source of funds from South American parallel currency exchange market activity. The primary cause of this failure is that AEBI’s account monitoring system and the detail reports provided to the RM did not identify the country of origin or the source of incoming funds. This failure contributed significantly to the RM’s failure to identify the massive amounts of parallel market transactions occurring in AEBI accounts.

27. Even in situations where accounts breached parameters and CAMS flagged the account for review by the RM, the bank failed to effectively investigate the account activity. In

general, the RM’s were not given reports with sufficient transaction information to allow them to effectively review the activity in the account. On a number of occasions, instead of doing further investigation, RM’s simply informed Compliance that the activity in the account was consistent with the RM’s knowledge of the client’s business. No real review was conducted by the RM, and Compliance did not independently look at the account activity to corroborate what the RM was reporting.

28. The “Rules Based” as opposed to a “Risk Based” approach of monitoring activity, coupled with reliance on the RM to provide the assessment of the quality of account flows, without independent review and corroboration, was ineffective and caused AEBI to fail to identify, prevent, and report suspicious activity. Given that the account monitoring at AEBI was not a risk-based program, it was even more critical for AEBI’s compliance personnel to independently review the account activity. Yet, the limited “independent reviews” conducted by Compliance were confined to those accounts that had exceeded external debit parameters; to the extent no exceptions were noted all activity was deemed to be appropriate.

Deficiencies in Independent Review of Account Activity

29. As part of AEBI’s policies and procedures for account activity monitoring, Compliance personnel were supposed to perform spot checks or independent reviews of accounts that breached parameters. AEBI’s compliance personnel maintained a log of the accounts reviewed and the results. This log recorded the name of the responsible RM, the account name, the parameter breached (holdings, activity- external debits, or both), and the comments or explanations of the activity causing the breach. A review of this log showed significant deficiencies in AEBI’s “independent review” process.

30. AEBI’s local compliance officer was permitted to exempt accounts from activity monitoring based only on the judgment of the compliance officer. Of the total number of accounts reviewed, the Compliance officer had exempted numerous accounts from the review process, many of which were commercial accounts held in offshore corporate names. There were some instances of accounts that had consistently breached parameters for over 21 months and went without review by Compliance for that same time. Compliance frequently justified the exemption based on the fact that the account was commercial in nature.

31. It is apparent that AEBI failed to adequately review accounts during these reviews. One of the Targeted Accounts, for example, was reviewed through this process in July 2003. The compliance officer conducting the review explained that the parameter breach occurred because the customer had received payments from corporate sales. Yet the reviewer failed to note that during that month there were several unexplained incoming wire transfers, one of which, unbeknownst to the reviewer, came from a DEA undercover account and was drug money.

32. Some of the accounts being reviewed by Compliance were being used to conduct heavy commercial activity as well as high-risk foreign exchange transactions. A sample of accounts reviewed for parameter breaches showed a significant number of accounts with commercial activity. Also, the comments provided illustrated that independent reviews were not actually being conducted by Compliance, but rather were based on the uncorroborated information provided by the RM.

Source of Funds

33. As discussed above, bank personnel recognized the importance of knowing a

client’s source of wealth. However, the CAMS system did not consider or monitor source of wealth. Further, CAMS only monitored for breaches in preset parameters: it did not identify or monitor the country of origin or destination of funds flowing in and out of the accounts. Even the Activity Detail Reports produced by CAMS offered little in the way of detail. The information CAMS provided on incoming wires did not include originator information, so the bank was unable to monitor or review the source of funds sent into an account. Similarly, the information provided for check deposits, even pouch deposits containing dozens of third-party checks, included only the total deposit amount, and the date and type of deposit.

Reactionary Suspicious Activity Reports

34. A review of the Suspicious Activity Reports filed by AEBI shows a reactive nature in the Bank’s reporting. From 1996 through 2004, only three SARs were filed as a result of monitoring. Given the nature of the high risks associated with Private Banking and specifically with the majority of the client base in countries presenting a high-risk of money-laundering, the nominal amount of filings that resulted from activity monitoring are very small and represent an ineffective account monitoring program.

BMPE Exceptions

35. AEBI’s particular risk to money laundering through parallel currency exchange transactions and the BMPE is heightened (1) because many of its clients are high net worth individuals resident in high risk countries in Latin America, such as Colombia, often deriving their wealth from commercial activities; (2) due to its character as a banking organization primarily engaged in providing private banking services to non-resident aliens; and (3) as a private bank. As early as November 1999, Private Banking was identified as a high-risk area in

the fight against money laundering.(2)

36. AEBI personnel were well aware of the BMPE and the prevalent use of the BMPE by Colombian businessmen and the nature of transactions which may be associated with the BMPE. Bank personnel also demonstrated sophisticated knowledge and understanding of parallel currency exchange markets. They also were aware that it was common knowledge in South America, particularly Colombia, that the parallel exchange markets were funded at least in part with drug money and that there were two main reasons to use the parallel markets: 1) tax avoidance; and 2) a better exchange rate. At the same time, these AEBI personnel considered the parallel exchange market a “fact of life” in South America - not something to be prevented or reported - but something that any financial institution providing banking services to wealthy South Americans would have to accommodate in the ordinary course of business.

37. The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), has published extensive guidance on the BMPE to financial institutions, including AEBI. In November 1997, FinCEN issued Advisory Number 9, to “alert banks and other depository institutions to a large-scale, complex money laundering system being used extensively by Colombian drug cartels to launder the proceeds of narcotics sales.” That Advisory was followed by a second in June 1999, Issue Number 12, to provide “banks and other depository institutions with additional information concerning the Black Market Peso Exchange system.” In sum, these Advisories provided valuable information for banks to identify BMPE activity and

(2) Testimony of Richard A. Small, Assistant Director, Division of Banking Supervision and Regulation, Vulnerability of Private Banking to Money Laundering Activities, Before the Permanent Subcommittee on Investigations, Committee on Governmental Affairs, U.S. Senate, November 10, 1999

provided details of “red flags” that should alert banks to BMPE activity. AEBI was well aware of the BMPE, providing extensive coverage of the topic in its AML and BSA training materials.

38. United States and foreign corporations that do a significant volume of business with Colombian and other South American companies, and their domestic financial institutions, can identify BMPE dollar payments for exports or services because the BMPE dollar payments received for the goods or services sold to Colombia or other South American customers rarely come from the customer directly. Generally, these BMPE dollar payments are: (1) made in the United States or foreign country with bulk cash (often delivered by local “couriers”); (2) involve the delivery of structured money orders, traveler’s checks, cashier’s checks, or bank checks (each usually under $10,000 in value), (3) involve checks drawn from United States banks in the name of, or negotiated by, some person or company not readily identifiable with the United States exporter’s customer; or (4) are in the form of wire transfers from United States bank accounts that are not in the Colombian or other South American customer’s name. Third-party wire transfers constitute the most common form of BMPE dollar payments. A common thread in all forms of BMPE payments is that they rarely come directly from the person or company that ultimately receives credit for the payment (i.e., the Colombian importer or customer).

American Express Bank International’s Remedial Actions

39. The criminal investigation into the beneficial owners of the Targeted Accounts continues. Throughout this part of the investigation, AEBI’s cooperation with law enforcement has been outstanding.

40. AEBI has devoted considerable resources to correct the identified BSA and AML

deficiencies, and employees who failed to take vigorous action to support compliance efforts have either left AEBI or left their positions. AEBI has also identified, reported, and ultimately closed accounts used to process suspicious transactions, including each of the Targeted Accounts. As part of that effort, AEBI has:

· Contracted with AML and BSA compliance experts to: (1) assist AEBI in conducting a comprehensive review of AEBI’s BSA and AML programs; (2) conduct a “look-back” analysis of high-risk accounts and transactions, and to file SARs where appropriate; and (3) make recommendations for restructuring AEBI’s BSA and AML compliance programs, including the development of enhanced BSA and AML polices and procedures.

· Implemented improved policies related to high-risk accounts.

· Enhanced its Compliance department, staffed by more than 12 full-time employees, who are exclusively engaged in BSA and AML compliance.

· Significantly enhanced its transaction monitoring process.

· Conducted additional training on BMPE and other BSA and AML compliance issues.

41. AEBI is committed to complying with its BSA and AML responsibilities and to cooperating with law enforcement.

EX-99.2 3 a07-21089_2ex99d2.htm EX-99.2

Exhibit 99.2

UNITED STATES OF AMERICA

BEFORE

THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

	)
In the Matter of	)
	)	Docket No. 07-017-B-EC
AMERICAN EXPRESS BANK	)
INTERNATIONAL	)	Cease and Desist Order and Order of
Miami, Florida	)	Assessment of a Civil Money Penalty Issued
	)	Upon Consent Pursuant to the Federal
	)	Deposit Insurance Act, as Amended
	)
	)

WHEREAS, American Express Bank International, Miami, Florida (“AEBI”) is an Edge corporation organized under Section 25A of the Federal Reserve Act (12 U.S.C. § 611 et seq.) that offers traditional private banking services principally to high net worth customers located in Latin America, and is owned by American Express Bank Limited (“AEB”), a state-chartered corporation which is supervised by the New York State Banking Department;

WHEREAS, the Board of Governors of the Federal Reserve System (the “Board of Governors”) and AEBI have the common goal to ensure that AEBI complies with all applicable federal and state laws, rules, and regulations relating to anti-money laundering (“AML”), including the Bank Secrecy Act (the “BSA”) (31 U.S.C. § 5311 et seq.); the rules and regulations issued thereunder by the U.S. Department of the Treasury (31 C.F.R. Part 103)(the “BSA regulations”); and the applicable AML requirements of Regulation K of the Board of Governors (12 C.F.R. §§ 211.5(k) and 211.5(m));

WHEREAS, the Board of Governors and AEBI have mutually agreed to the issuance of this Order to Cease and Desist and Order of Assessment of a Civil Money Penalty Upon Consent against AEBI (the “Order”);

WHEREAS, in 1993, the Board of Governors issued a Consent Order to Cease and Desist (the “1993 Order”) and a Consent Order of Assessment of a Civil Money Penalty against AEBI that were designed to address deficiencies relating to safety and soundness, including but not limited to AEBI’s BSA/AML compliance, corporate governance and audit; after AEBI made improvements and enhancements in response to the 1993 Order, the Board of Governors terminated the 1993 Order on January 7, 1997;

WHEREAS, the U.S. Department of Justice (“DOJ”) has conducted an investigation that involved certain accounts and transactions at AEBI for the period between December 1999 and April 2004. AEBI has entered into a Deferred Prosecution Agreement with DOJ on August 6, 2007, to resolve a one-count Information charging AEBI with failing to maintain an effective AML program in violation of Title 31 United States Code, sections 5318(h)(1) and 5322(b) (31 U.S.C. §§ 5318(h)(1) and 5322(a)). In connection with the Deferred Prosecution Agreement, DOJ issued a “Statement of Facts” alleging that AEBI’s AML program had serious and systemic deficiencies and that its transaction monitoring system and internal controls were inadequate to detect, identify, and report money laundering activity; in addition, DOJ identified specific instances of suspicious or illicit activity in the form of drug-related money laundering transactions, accomplished through “Black Market Peso Exchange” wire transfers that were undertaken as part of an undercover law enforcement operation;

WHEREAS, in connection with examinations conducted by the Federal Reserve Bank of Atlanta (the “Reserve Bank”), examiners identified weaknesses in AEBI’s BSA/AML

compliance program, including deficiencies involving account monitoring. In 2004 and 2005, AEBI represented to the Reserve Bank that it was in the process of implementing new, more sophisticated transaction and account monitoring, and that it was improving controls with respect to offshore bearer share personal investment companies (“PICs”) that had accounts at AEBI;

WHEREAS, the Reserve Bank conducted an examination beginning September 2006 of AEBI focusing on AEBI’s BSA/AML compliance program. The examiners found that AEBI had significant breakdowns in carrying out BSA compliance activities and, as a result, failed to establish and maintain procedures adequately designed to assure and monitor AEBI’s compliance with the BSA and BSA regulations. Specifically,

A. AEBI failed to adopt and implement comprehensive customer due diligence and enhanced due diligence processes, particularly regarding high risk customers; AEBI did not maintain effective control measures for bearer share and other PICs; and AEBI failed to adhere to its own written policies, including policies requiring adequate periodic reviews of high risk accounts;

B. AEBI’s transaction monitoring system, which AEBI had represented would be an improvement over the previous system, was inadequate. The automated system was severely compromised by data integrity problems and by other deficiencies. In addition, AEBI failed to establish adequate management controls over the resolution of identified potentially suspicious activity. As a result, AEBI was unable to identify, monitor and report suspicious activity that reasonable monitoring would have flagged as warranting review;

C. AEBI failed to perform satisfactory independent testing of its BSA/AML compliance program. In particular, AEBI’s internal audit function failed to review the implementation of AEBI’s new automated transaction monitoring system; and

D. AEBI failed to provide for adequate oversight of and accountability for its BSA/AML compliance program by AEBI’s own management and by AEB, which had undertaken to provide oversight services with respect to AEBI’s BSA/AML compliance program;

WHEREAS, as a result of the deficiencies in AEBI’s BSA/AML compliance program, AEBI’s BSA/AML compliance program failed to meet minimum regulatory requirements and therefore violated 12 C.F.R. § 211.5(m)(1) and was conducted in an unsafe and unsound manner;

WHEREAS, AEBI is taking steps to address the unsafe and unsound practices and regulatory violations described above and has engaged several independent consultants to assist it in enhancing its BSA/AML policies and procedures, internal control environment, management oversight, and reporting of suspicious activities;

WHEREAS, the regulatory violations and unsafe and unsound practices described above warrant the assessment of civil money penalties by the Board of Governors under section 8(i)(2)(B) of the Federal Deposit Insurance Act, as amended (12 U.S.C. § 1818(i)(2)(B)) (the “FDI Act”), and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”);

WHEREAS, AEBI has consented to the assessment of a civil money penalty in the amount of Twenty Million dollars ($20,000,000.00) by the Board of Governors pursuant to section 8(i)(2)(B) of the FDI Act for the unsafe and unsound practices described above and for violating section 211.5(m)(1) of Regulation K of the Board of Governors, which penalty will be satisfied by payments made by AEBI pursuant to the Deferred Prosecution Agreement and pursuant to the civil money penalty assessed by FinCEN described below;

WHEREAS, AEBI has consented to the assessment of a concurrent civil money penalty in the amount of Twenty Million dollars ($20,000,000) by FinCEN for violations of the AML program and suspicious activity reporting requirements of the BSA; and

WHEREAS, on August 3, 2007, the board of directors of AEBI, at a duly constituted meeting, adopted resolutions authorizing and directing Mr. Simon Amich, President and Chief Executive Officer of AEBI, to enter into this Order on behalf of AEBI, and consenting to compliance by AEBI and its institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the FDI Act (12 U.S.C. §§1813(u) and 1818(b)(3)), with each and every applicable provision of this Order and waiving any and all rights that AEBI may have pursuant to section 8 of the FDI Act (12 U.S.C. § 1818) to: (i) a hearing for the purpose of taking evidence on any matters set forth in this Order; (ii) judicial review of this Order; (iii) contest the issuance of this Order by the Board of Governors pursuant to section 8 of the FDI Act; and (iv) challenge or contest, in any manner, the basis, issuance, validity, terms, effectiveness or enforceability of this Order or any provisions hereof.

NOW, THEREFORE, before the filing of any notices, or taking of any testimony or adjudication of or finding on any issues of fact or law herein, and without this Order constituting an admission by AEBI of any allegation made or implied by the Board of Governors in connection with this matter, and solely for the purpose of settling this matter without a formal proceeding being filed and without the necessity for protracted or extended hearings or testimony and pursuant to the aforesaid resolution;

IT IS HEREBY ORDERED, pursuant to sections 8(b)(1), 8(b)(3), and 8(i) of the FDI Act (12 U.S.C. §§ 1818(b)(1), 1818(b)(3), and 1818(i)), that AEBI and its institution-affiliated parties shall cease and desist and take affirmative actions as follows:

Primary Contact

1. Within 10 days of this Agreement, AEBI shall designate an officer to be responsible for coordinating and submitting to the Reserve Bank the written programs, plans, policies, procedures, and engagement letters required under the terms and conditions of this Order.

Management Review and Oversight

2. (a) Within 10 days of this Order, the board of directors of AEBI shall retain an independent consultant acceptable to the Reserve Bank, or enter into a new or revised engagement with the independent management consultant previously retained by AEBI, to conduct a review of the governance and organization of AEBI’s BSA/AML compliance program and the performance of AEBI’s staff responsible for the BSA/AML compliance program (the “Management Review”) and to prepare a written report of findings and recommendations (the “Management Report”). The purposes of the Management Review shall be to enhance AEBI’s oversight of its BSA/AML compliance program and to ensure the adequate staffing of the program by qualified and trained personnel needed for an effective control environment. The terms of the engagement shall require that the Management Review be completed within 45 days of the retention of the independent consultant or the new or revised engagement with the existing management consultant, and that the Management Report be submitted to the board of directors of AEBI and the Reserve Bank within 10 days of the completion of the Management Review. The Management Review shall, at a minimum, address, consider, and include:

(i) the duties and responsibilities of each officer and staff member regarding BSA/AML compliance, including reporting lines within AEBI and to AEB and business line accountability;

(ii) an evaluation of each current senior officer with responsibilities related to AEBI’s BSA/AML compliance program to determine whether the individual possesses the ability, experience, and other qualifications required to competently perform present and anticipated duties, including the ability to provide appropriate oversight, to ensure compliance with all applicable laws, rules, and regulations, to adhere to established policies and procedures, and to comply with the requirements of this Order;

(iii) an assessment of the structure and composition of AEBI’s board of directors and relevant committees and determination of the structure and composition needed to provide adequate oversight of the BSA/AML compliance program;

(iv) the responsibility of the board of directors to monitor management’s adherence to approved policies and procedures and applicable laws, rules, and regulations, and to monitor exceptions to approved policies and procedures;

(v) the maintenance of adequate and complete minutes of all meetings of the board of directors and committees of the board and of management;

(vi) the information to be included in periodic reports regarding BSA/AML compliance to the board of directors and AEB; and

(vii) the independence and effective authority of compliance functions and the Compliance Committee.

(b) Within 30 days of the submission of the Management Report, AEBI shall submit a written plan to the Reserve Bank that includes a description of the specific actions that AEBI proposes to take, or has taken, to strengthen the management and oversight of AEBI’s BSA/AML compliance program.

BSA/AML Compliance Program

3. Within 10 days of this Order, the board of directors of AEBI shall retain an independent consultant acceptable to the Reserve Bank, or enter into a new or revised engagement with the independent BSA/AML consultant previously retained by AEBI, to conduct a review of AEBI’s BSA/AML compliance program (the “BSA/AML Review”) and to prepare a written report of findings and recommendations (the “BSA/AML Report”). The purpose of the BSA/AML Review shall be to conduct a comprehensive review of AEBI’s BSA/AML compliance program and make recommendations that will enable AEBI to establish an effective program that is commensurate with AEBI’s size, products and services, customers, and geographic locations. The terms of the engagement shall require that the BSA/AML Review be completed within 45 days of the retention of the independent consultant or the new or revised engagement with the existing BSA/AML consultant, that the BSA/AML Report be submitted to the board of directors of AEBI and the Reserve Bank within 10 days of the completion of the BSA/AML Review, and that supporting material associated with the BSA/AML Review be made available to the Reserve Bank upon request.

4. Within 30 days of the board of directors’ receipt of the BSA/AML Report, AEBI shall submit to the Reserve Bank an acceptable written BSA/AML compliance program that is designed to ensure compliance with all applicable BSA/AML requirements and is commensurate with AEBI’s business activities and BSA/AML risk profile. The program shall include provisions for updates on an ongoing basis as necessary to incorporate amendments to the BSA and BSA regulations. At a minimum, the program shall include:

(a) A system of internal controls designed to ensure ongoing compliance with the BSA, the BSA regulations, and sections 211.5(k) and 211.5(m) of Regulation K of the Board of Governors, including but not limited to:

(i) comprehensive customer due diligence and enhanced due diligence policies, procedures, and practices, including but not limited to procedures designed to identify account holders; and

(ii) controls to ensure compliance with reporting and recordkeeping requirements;

(b) the independent testing of compliance with the BSA and BSA regulations;

(c) adequate resources for the BSA compliance officer, including sufficient staff levels, to implement and maintain an effective program for compliance with all applicable BSA/AML requirements and AEBI’s internal policies and procedures; and

(d) appropriate training to all staff regarding amendments to BSA/AML requirements and changes in internal compliance policies and procedures.

Suspicious Activity Reporting and Customer Due Diligence

5. Within 30 days of the board of directors’ receipt of the BSA/AML Report required by paragraph 3 of this Order, AEBI shall submit to the Reserve Bank an acceptable written customer due diligence program designed to reasonably ensure the identification and timely, accurate, and complete reporting of all known or suspected violations of law against or involving AEBI and suspicious transactions at AEBI to law enforcement and supervisory authorities as required by applicable suspicious activity reporting laws and regulations. At a minimum, the program shall include:

(a) A methodology for assigning risk levels to AEBI’s customer base that considers factors such as type of customer, type of product or service, and geographic location;

(b) a risk-focused assessment of the AEBI’s customer base that:

(i) identifies the categories of customers whose transactions and banking activities are routine and usual;

(ii) determines the appropriate level of enhanced due diligence necessary for those categories of customers that pose a heightened risk of conducting potentially illicit activities at or through AEBI; and

(iii) provides for the periodic reassessment and update of customer assessment risk-ratings;

(i) determine the appropriate documentation necessary to ascertain the identity and business activities of the customer;

(ii) establish risk mitigation control measures;

(iii) understand the normal and expected transactions of the customer; and

(iv) periodically review the adequacy of the customer files documentation and obtain updated information as needed; and

(d) establishment of procedures and appropriate monitoring criteria designed to ensure proper identification and timely reporting of all known or suspected violations of law and suspicious transactions, including, but not limited to:

(i) effective, ongoing monitoring of customer accounts and transactions;

(ii) appropriate participation by senior management in the process of identifying, reviewing, and reporting potentially suspicious activity;

(iii) adequate referral and escalation of information about potentially suspicious activity through appropriate levels of management and board committees;

(iv) timely resolution of escalated issues by senior management and board committees;

(v) adequate procedures to ensure the timely and complete preparation and filing of Suspicious Activity Reports; and

(vi) maintenance of sufficient documentation with respect to the investigation and analysis of suspicious activity, including the resolution and escalation of concerns.

Independent Testing

6. Within 60 days of this Order, AEBI shall submit to the Reserve Bank an acceptable written plan for the independent testing of AEBI’s compliance with all applicable BSA/AML requirements. At a minimum, the plan shall address, consider, and include:

(a) The coverage, frequency, and scope of the independent testing of AEBI’s BSA/AML compliance program, including but not limited to transactions and account monitoring policies, procedures, and practices, the integrity of data contained in internal customer databases, and the transaction monitoring system;

(b) provisions for independent testing to be performed on a regular basis by qualified parties who are knowledgeable of BSA/AML requirements and are independent of the business lines and compliance function;

(c) procedures for the review of independent testing results by senior AEBI management and escalation to the board of directors and board committees, as appropriate; and

(d) procedures to ensure that AEBI management institute and complete appropriate actions in response to the independent testing results.

Transaction Monitoring System

7. Within 90 days of this Order, AEBI shall complete the project designed to enhance the information contained in its internal customer database related to specific risk attributes of clients, to use this database as the source of customer data to determine the risk level of its clients, and to identify its high-risk accounts for its BSA/AML compliance program.

8. (a) Within 30 days of the board of directors’ receipt of the BSA/AML Report required by paragraph 3 of this Order, AEBI shall submit to the Reserve Bank acceptable written customer account and transaction monitoring policies and procedures that are designed to effectively manage legal and reputational risks, and ensure compliance with regulatory requirements.

(b) Within 90 days of this Order, AEBI shall submit to the Reserve Bank an acceptable written plan, including a timetable, for the full installation, testing, and activation of an improved transaction monitoring system. The plan shall also include a methodology and target date for determining that the transaction monitoring system is effective.

(c) The acceptable policies and procedures submitted pursuant to paragraph 8(a) of this Order shall take effect upon the determination by a competent independent outside consultant acceptable to the Reserve Bank, or the independent BSA/AML consultant previously retained by AEBI, that the transaction monitoring system described in paragraph 8(b) of this

Order is fully effective. Documentation to support the determination that the new transaction monitoring system is fully effective shall be retained for subsequent supervisory review.

(d) The interim transaction monitoring procedures adopted by AEBI in 2007 shall remain in effect until the independent outside consultant or the existing BSA/AML consultant described in paragraph 8(c), confirms, through the performance of appropriate tests, that the improved transaction monitoring system is fully effective.

Transaction Review

9. Within 30 days of this Order, AEBI shall engage an independent consultant acceptable to the Reserve Bank, or enter into a new or revised engagement with the independent BSA/AML consultant previously retained by AEBI, to conduct a review of account and transaction activity to determine whether suspicious activity involving accounts or transactions at, by, or through AEBI was properly identified and reported in accordance with applicable suspicious activity reporting regulations (the “Transaction Review”) and to prepare a written report detailing the consultant’s findings (the “Transaction Review Report”).

10. Within 10 days of the engagement of the independent consultant, or the entry into a new or revised engagement with AEBI’s existing BSA/AML consultant, but prior to the commencement of the Transaction Review, AEBI shall submit to the Reserve Bank for approval an engagement letter that sets forth:

(a) The scope of the Transaction Review, including, but not limited to, a review of high risk accounts;

(b) the methodology for conducting the Transaction Review, including any sampling procedures to be followed;

(d) the anticipated date of completion of the Transaction Review and the Transaction Review Report; and

(e) a commitment that supporting material associated with the Transaction Review will be made available to the Reserve Bank upon request.

11. The Transaction Review shall cover the time period from January 1, 2007, to June 30, 2007. Based on the Reserve Bank’s evaluation of the Transaction Review, the Reserve Bank may, in its discretion, direct AEBI to extend the Transaction Review to include time periods subsequent to January 1, 2006, with the scope and methodology for any such extension to be determined in the same manner as described in the preceding paragraph of this Order.

12. AEBI shall provide to the Reserve Bank a copy of the Transaction Review Report at the same time that the report is provided to AEBI.

13. Throughout the Transaction Review, AEBI shall ensure that all matters or transactions required to be reported that have not previously been reported are reported in accordance with applicable rules and regulations.

14. If, while this Order is in effect, AEB, AEBI, or their parent companies are parties to a definitive contract to sell AEB or AEBI, or otherwise transfer substantially all of AEBI’s assets and liabilities to an unaffiliated third-party, AEBI shall take all steps necessary to ensure that, notwithstanding the proposed sale or other transfer, (i) the Transaction Review and Transaction Review Report will be completed as required by this Order; (ii) the consultant who is conducting the Transaction Review will continue to have reasonable access to all records that are needed to complete the Transaction Review and the Transaction Review Report; and (iii) supporting material associated with the Transaction Review will continue to be available to the Reserve Bank upon request.

Civil Money Penalty Assessment

15. The Board of Governors hereby assesses AEBI a civil money penalty in the amount of Twenty Million dollars ($20,000,000.00).

16. The civil money penalty assessed pursuant to paragraph 15 of this Order shall be concurrent with the penalty of Twenty Million dollars ($20,000,000.00) assessed against AEBI by FinCEN, and shall be fully satisfied upon payment by AEBI of the civil money penalty assessed by FinCEN against AEBI and of the forfeiture called for under the Deferred Prosecution Agreement.

Compliance with Order

17. Within 15 days after the end of each calendar quarter following the date of this Order, AEBI shall submit to the Reserve Bank written progress reports detailing the form and manner of all actions taken to secure compliance with the provisions of this Order and the results thereof. The Reserve Bank may, in writing, discontinue the requirement for progress reports or modify the reporting schedule.

Approval of Programs and Procedures

18. (a) AEBI shall submit the written policies, procedures, programs, plans, and engagement letters that are acceptable to the Reserve Bank within the applicable time period set forth in paragraphs 4, 5, 6, 8(a), 8(b), and 10 of this Order. Independent consultants acceptable to the Reserve Bank shall be retained by AEBI, or new or revised engagements shall be executed by AEBI with existing consultants, within the period set forth in paragraphs 2, 3, and 9 of this Order.

(b) Within 10 days of approval by the Reserve Bank, AEBI shall adopt the policies, procedures, programs, plans, and engagement letters. Upon adoption, AEBI shall

implement the approved policies, procedures, programs, and plans, and thereafter fully comply with them.

(c) During the term of this Order, the approved policies, procedures, programs, plans, and engagement letters shall not be amended or rescinded without the prior written approval of the Reserve Bank.

Communications

19. All communications regarding this Order shall be sent to:

(a) Mr. Robert M. Schenck

Vice President

Federal Reserve Bank of Atlanta

1000 Peachtree Street, N.E.

Atlanta, Georgia 30309-4470

(b) Mr. Simon Amich

President and Chief Executive Officer

American Express Bank International

1111 Brickell Avenue

Miami, Florida 33131

Miscellaneous

20. Notwithstanding any provision of this Order to the contrary, the Reserve Bank may, in its sole discretion, grant written extensions of time to AEBI to comply with any provision of this Order.

21. The provisions of this Order shall be binding upon AEBI and all of their institution-affiliated parties, in their capacities as such, and their successors and assigns.

22. Each provision of this Order shall remain effective and enforceable until stayed, modified, terminated or suspended by the Reserve Bank. If while this Order is in effect, AEB, AEBI, or their parent companies are parties to a definitive contract to sell AEB or AEBI, or otherwise transfer substantially all of AEBI’s assets and liabilities to an unaffiliated third-party,

AEBI shall promptly notify the Reserve Bank, which shall have discretion to stay, modify, terminate or suspend any or all of the provisions of this Order.

23. The provisions of this Order shall not bar, estop or otherwise prevent the Board of Governors, the Reserve Bank, or any other federal or state agency from taking any other action affecting AEBI or any of its current or former institution-affiliated parties and their successors and assigns.

By order of the Board of Governors of the Federal Reserve System, effective this 6th day of August, 2007.

			BOARD OF GOVERNORS OF THE
			FEDERAL RESERVE SYSTEM


By:		/s/ Simon Amich	By:	/s/ Jennifer J. Johnson
	Simon Amich		Jennifer J. Johnson
	President and Chief Executive Officer		Secretary of the Board
	American Express Bank International

EX-99.3 4 a07-21089_2ex99d3.htm EX-99.3

Exhibit 99.3

UNITED STATES OF AMERICA

DEPARTMENT OF THE TREASURY

FINANCIAL CRIMES ENFORCEMENT NETWORK

IN THE MATTER OF:	)
	)
	)
	)	Number 2007- 1
AMERICAN EXPRESS BANK INTERNATIONAL	)
MIAMI, FLORIDA	)
AMERICAN EXPRESS TRAVEL RELATED	)
SERVICES COMPANY, INC.	)
SALT LAKE CITY, UTAH	)
	)
	)

ASSESSMENT OF CIVIL MONEY PENALTY

I. INTRODUCTION

Under the authority of the Bank Secrecy Act and regulations issued pursuant to that Act,(1) the Financial Crimes Enforcement Network has determined that grounds exist to assess a civil money penalty against American Express Bank International, Miami, Florida, (“the Bank”) and American Express Travel Related Services Company, Inc., Salt Lake City, Utah, (collectively, “American Express”). To resolve this matter, and only for that purpose, American Express has entered into a CONSENT TO THE ASSESSMENT OF CIVIL MONEY PENALTY (“CONSENT”) without admitting or denying the determinations by the Financial Crimes Enforcement Network, as described in Sections III and IV below, except as to jurisdiction in Section II below, which is admitted.

The CONSENT is incorporated into this ASSESSMENT OF CIVIL MONEY PENALTY (“ASSESSMENT”) by this reference.

II. JURISDICTION

American Express Bank International is an Edge Act corporation organized under section 25A of the Federal Reserve Act. The Board of Governors of the Federal Reserve System (“Federal Reserve”) is the federal functional regulator for American Express Bank International and examines the Bank for compliance with the Bank Secrecy Act, its implementing regulations, and similar rules under Title 12 of the United States Code.

(1)31 U.S.C. § 5311 et seq. and 31 C.F.R. Part 103.

American Express Travel Related Services Company is a money services business, located in Salt Lake City, Utah, that issues, sells and redeems traveler’s checks, exchanges currency and provides check cashing and money transmission services, within the United States and U.S. Territories.

At all relevant times, the aforementioned American Express entities were “financial institutions” within the meaning of the Bank Secrecy Act and the regulations issued pursuant to that Act.(2)

III. DETERMINATIONS

A. Summary

American Express Bank International’s anti-money laundering program was deficient in three of the four core elements. Namely, the Bank failed to implement adequate internal controls, failed to conduct adequate independent testing, and failed to designate compliance personnel to ensure compliance with the Bank Secrecy Act. American Express Bank International’s high-risk customer base, product lines, and international jurisdiction of operations required elevated measures to manage the risk of money laundering and other financial crimes. Nevertheless, the Bank conducted business without adequate systems and controls reasonably designed to manage the risk of money laundering, including the potential for Black Market Peso Exchange(3) transactions that may be used by Colombian drug cartels to launder the proceeds of narcotics sales. American Express Bank International’s failure to comply with the Bank Secrecy Act and the regulations issued pursuant to that Act were serious, repeated and systemic.

Additionally, a review by the Financial Crimes Enforcement Network of American Express Travel Related Services Company revealed a substantial number of failures to file timely, accurate and complete suspicious activity reports involving over $500 million in suspicious transactions.

B. Violations of the Requirement to Implement an Anti-Money Laundering Program

American Express Bank International provides traditional private banking services, including secured lending and asset management to a target customer base of high net-worth individuals and their businesses throughout Latin America.

The Financial Crimes Enforcement Network determined that American Express Bank International violated the requirement to establish and implement an adequate anti-money laundering program. Since April 24, 2002, the Bank Secrecy Act and its implementing regulations have required banks to establish and implement anti-money laundering programs.(4) The anti-money laundering program of American Express Bank International would meet these requirements if the program conforms to rules of the Federal Reserve that govern anti-money laundering programs. The Federal Reserve has required a program reasonably designed to assure

(2) 31 U.S.C. § 5312(a)(2) and 31 C.F.R. § 103.11.

(3) See FinCEN Advisory Issue 9 (November 1997) and FinCEN Advisory Issue 12 (June 1999), at www.fincen.gov.

(4) 31 U.S.C. § 5318(h)(1) and 31 C.F.R. § 103.120.

and monitor compliance with reporting and record keeping requirements under the Bank Secrecy Act.(5) Reporting requirements under the Bank Secrecy Act include the requirement to report suspicious transactions.(6) The Board of Governors of the Federal Reserve System also requires that an anti-money laundering program contain the following elements: (1) system of internal controls; (2) independent testing for compliance; (3) designation of an individual, or individuals, to coordinate and monitor day-to-day compliance; and (4) training of appropriate personnel.(7)

1. Internal Controls

American Express Bank International failed to implement internal controls reasonably designed to comply with the Bank Secrecy Act. American Express Bank International conducted business without adequate systems and controls, as appropriate and practical, to detect and timely report suspicious activity.

American Express Bank International did not implement adequate polices, procedures and internal controls across the institution, particularly with regard to customers presenting a higher risk for money laundering. The Bank repeatedly failed, over the course of multiple regulatory examinations dated June 2, 2003, July 6, 2004, July 11, 2005, and September 12, 2006, with increasingly adverse findings, to implement effective account monitoring controls to ensure compliance with the Bank Secrecy Act. For example:

· Review parameters for customer account activity were not risk focused, nor designed to target specific account activity with an elevated potential for money laundering;

· Review parameters for transaction activity in a number of customer accounts were set at a high or excessive level, thereby substantially reducing the likelihood that suspicious activity would be detected;

· Processes for exempting certain accounts from transaction monitoring reviews to detect suspicious activity lacked any written justification or rationale for the exemptions;

· Measures to fully identify account relationships involving Private Investment Companies (PICs) and bearer share accounts, to assess and manage the potential risk for money laundering in these accounts were not effectively implemented; and

· Periodic reviews of high-risk accounts, to determine whether account activity deviated from expected activity in customer profiles, were not conducted in a manner to adequately detect and report suspicious activity, or in accordance with Bank policy. Furthermore, these periodic reviews were conducted on an individual account level, as opposed to an entire aggregate customer relationship basis. As a result, when a customer maintained multiple accounts, aggregate activity across these accounts was not captured and analyzed to gain a complete picture of the potential for money laundering and other illicit activity.

The internal control processes governing the suspicious activity reporting program at American Express Bank International were not sufficient to comply with the Bank Secrecy Act.

(5) 12 C.F.R. § 208.63(b)(1) and 12 C.F.R. § 211.5(m).

(6) 31 C.F.R. § 103.18.

(7) 12 C.F.R. § 208.63(c)(1) - (4) and 12 C.F.R. § 211.5(m).

The monitoring system for suspicious activity reporting compliance at the Bank exhibited persistent data integrity issues. These issues were so serious that American Express Bank International suspended use of the system in early 2007, and implemented an interim monitoring system, pending correction of data integrity issues and review of system thresholds for suspicious activity monitoring. In addition, in September 2006, prior to suspending the use of the suspicious activity monitoring system, the Bank had a backlog of hundreds of suspicious activity alerts awaiting review. Furthermore, one individual had authority to unilaterally clear suspicious activity alerts without adequate oversight or controls to ensure appropriate and timely disposition of the alerts. As a result of these problems, American Express Bank International failed to file timely suspicious activity reports.

2. Independent Testing

American Express Bank International’s independent testing of its Bank Secrecy Act program was ineffective. Internal Audit Staff lacked sufficient training and knowledge to facilitate compliance with the Bank Secrecy Act. Audit scopes were not always tailored or designed to capture and test for compliance with certain requirements of the Bank Secrecy Act. Internal Audit staff also failed to conduct sufficient customer transaction testing to adequately evaluate the overall sufficiency of the anti-money laundering program at the Bank. Furthermore, Internal Audit failed to assist management with tracking and following-up on previously identified regulatory examination deficiencies.

In addition, Internal Audit failed to conduct adequate testing of the suspicious activity monitoring system or identify the numerous data integrity concerns associated with this system for an extended period of time. The ineffectiveness of the Internal Audit function at American Express Bank International contributed to the failure to identify significant deficiencies in this system before 2007.

3. Designation of an Individual or Individuals to Ensure Compliance with the Bank Secrecy Act

In view of the scope, volume and nature of activity at American Express Bank International, management failed to designate enough personnel to ensure day-to-day compliance with the Bank Secrecy Act. Furthermore, compliance roles and responsibilities were not adequately defined and implemented with respect to gathering, integrating and responding to information such as validating customer records, reconciling data involving high-risk customers with customer profile documentation, and escalating or sharing identified negative customer information among appropriate personnel at the Bank. For example, management failed to ensure that compliance personnel independently validated customer information provided by the account relationship managers, and periodic customer account reviews did not document an analysis of transactional activity for deviations from expected activity. In addition, reviews performed by compliance personnel were conducted on a singular account basis rather than in the context of a customer’s entire relationship with the Bank.

C. Violations of the Requirement to Report Suspicious Transactions

The Financial Crimes Enforcement Network has determined that American Express violated the suspicious transaction reporting requirements of the Bank Secrecy Act and regulations issued pursuant to that Act. These reporting requirements impose an obligation on financial institutions to report transactions that involve or aggregate to at least $5,000, are conducted by, at, or through the financial institution, and that the institution “knows, suspects, or has reason to suspect” are suspicious.(8) A transaction is “suspicious” if the transaction: (1) involves funds derived from illegal activities, or is conducted to disguise funds derived from illegal activities; (2) is designed to evade the reporting or record keeping requirements of the Bank Secrecy Act or regulations under the Bank Secrecy Act; or (3) has no business or apparent lawful purpose and the financial institution knows of no reasonable explanation for the transaction after examining the available facts, including background and possible purpose of the transaction.(9)

Financial institutions must report suspicious transactions by filing suspicious activity reports and must generally do so no later than thirty (30) calendar days after detecting facts that may constitute a basis for filing such reports.(10) If no suspect was identified on the date of detection, a bank may delay the filing for an additional thirty (30) calendar days in order to identify a suspect, but in no event may the bank file a suspicious activity report more than sixty (60) calendar days after the date of initial detection.(11)

American Express violated the suspicious transaction reporting requirements of 31 U.S.C. § 5318(g) and 31 C.F.R. § 103.18 or 31 C.F.R. § 103.20, by failing to timely and/or accurately file a substantial number of suspicious activity reports.

The Financial Crimes Enforcement Network determined that American Express Travel Related Services Company failed to timely file over 1,000 Suspicious Activity Report by Money Services Business forms (“SAR-MSB”), during the period from May 7, 2006 through May 7, 2007, with suspicious transactions totaling over $500 million. Furthermore, a total of 1,639 SAR-MSBs filed by American Express Travel Related Services Company, between May 7, 2006 and May 7, 2007, were found to contain over 2,000 errors. Numerous filings contained multiple errors where sections of the form requiring data were left blank, incorrectly completed, or referred to another section of the form that lacked the referenced information.

American Express Travel Related Services Company often completed critical reporting fields by referencing the narrative portion of the form, or attachments, in direct contradiction to the form instructions. The SAR-MSB filing instructions explain how reporting fields are to be populated so data is retrievable and available to law enforcement. Contrary to the instructions on

(8) 31 C.F.R. § 103.18(a)(2) and 31 C.F.R. § 103.20(a)(3). For purposes of 31 C.F.R. § 103.20(a)(3), the $5,000 aggregate threshold applies to suspicious transactions derived from a review of clearance records of money orders or travelers checks that have been sold or processed by an issuer. All other suspicious transactions require reporting when the transaction aggregates to $2,000 as defined under 31 C.F.R. § 103.20(a)(2).

(9) 31 C.F.R. § 103.18(a)(2)(i) - (iii) and 31 C.F.R. § 103.20(a)(2)(i) – (iii). 31 C.F.R. § 103.20(a)(2)(iv) also defines a transaction as suspicious when it involves use of the money services business to facilitate criminal activity.

(10) 31 C.F.R. § 103.18 and 31 C.F.R. § 103.20.

(11) 31 C.F.R. § 103.18(b)(3).

the form, American Express Travel Related Services Company utilized phrases such as “See Narrative” and “See Attachment” in contradiction of the obligation to complete multiple Part I Subject Information reporting fields and PART III Transaction Location Information reporting fields in the SAR-MSBs even when the information to complete the required fields was known. Moreover, there were multiple instances where the narrative portion of the form was referenced in a field that required specific data. However, in some instances the narrative portion did not contain any information relating to the blank reporting field, thereby significantly undermining the purpose of the required reporting fields to make information available for use in investigations by government authorities.

The above described delays and errors impaired the usefulness of the suspicious activity reports by not providing law enforcement with more timely and accurate information related to over $500 million in suspicious transactions.

IV. CIVIL MONEY PENALTY

Under the authority of the Bank Secrecy Act and the regulations issued pursuant to that Act,(12) the Financial Crimes Enforcement Network has determined that a civil money penalty is due for violations of the Bank Secrecy Act, and the regulations issued pursuant to that Act, as described in this ASSESSMENT.

Based on the seriousness of the violations at issue in this matter, and the financial resources available to American Express, the Financial Crimes Enforcement Network has determined that the appropriate penalty in this matter is $25,000,000.

V. CONSENT TO ASSESSMENT

To resolve this matter, and only for that purpose, American Express Bank International and American Express Travel Related Services Company, without admitting or denying either the facts or determinations described in Sections III and IV above, except as to jurisdiction in Section II, which is admitted, consent to the assessment of a civil money penalty in the aggregate sum of $25,000,000, of which $20,000,000 is allocated to American Express Bank International and $5,000,000 is allocated to American Express Travel Related Services. This assessment is being issued concurrently with the Deferred Prosecution Agreement and accompanying $55,000,000 forfeiture by the Department of Justice against American Express Bank International, and a Cease and Desist Order and $20,000,000 civil money penalty by the Federal Reserve against American Express Bank International. As for the method of payment, the $25,000,000 civil money penalty by the Financial Crimes Enforcement Network shall be deemed as satisfied by a single $10,000,000 payment to the Department of the Treasury. The remaining $15,000,000 of the Financial Crimes Enforcement Network’s penalty against American Express Bank International shall be deemed as satisfied by a portion of the $55,000,000 forfeiture to the Department of Justice. American Express agrees to pay the amount of $10,000,000 within five (5) business days of this ASSESSMENT to the Department of the Treasury.

(12) 31 U.S.C. § 5321 and 31 C.F.R. § 103.57.

American Express recognizes and states that they enter into the CONSENT freely and voluntarily and that no offers, promises, or inducements of any nature whatsoever have been made by the Financial Crimes Enforcement Network or any employee, agent, or representative of the Financial Crimes Enforcement Network to induce American Express to enter into the CONSENT, except for those specified in the CONSENT.

American Express understands and agrees that the CONSENT embodies the entire agreement between American Express and the Financial Crimes Enforcement Network relating to this enforcement matter only, as described in Section III above. American Express further understands and agrees that there are no express or implied promises, representations, or agreements between American Express and the Financial Crimes Enforcement Network other than those expressly set forth or referred to in this document and that nothing in the CONSENT or in this ASSESSMENT is binding on any other agency of government, whether federal, state, or local.

VI. RELEASE

American Express understands that execution of the CONSENT, and compliance with the terms of this ASSESSMENT and the CONSENT, constitute a complete settlement and release of civil liability for the violations of the Bank Secrecy Act and regulations issued pursuant to that Act as described in the CONSENT and this Assessment against American Express. American Express further understands that the release from civil liability for violations of the Bank Secrecy Act and regulations issued pursuant to that Act by American Express Travel Related Services Company pertains only to suspicious activity reporting violations involving the issuance, sale and redemption of traveler’s checks, as described in the CONSENT and this ASSESSMENT.

	By:

		/s/ James H. Freis, Jr.
		James H. Freis, Jr., Director
		FINANCIAL CRIMES ENFORCEMENT NETWORK
		U.S. Department of the Treasury


	Date:	August 6, 2007

EX-99.4 5 a07-21089_2ex99d4.htm EX-99.4

Exhibit 99.4

NEW YORK STATE BANKING DEPARTMENT

NEW YORK, NEW YORK

	)
	)
AMERICAN EXPRESS BANK LTD.	)
New York, New York	)
	)	WRITTEN AGREEMENT
and	)
	)
NEW YORK STATE BANKING DEPARTMENT	)
New York, New York	)
	)

WHEREAS, the New York State Banking Department (“Department”) recently conducted an examination of American Express Bank, Ltd. (“Bank”) and determined that there are deficiencies in the Bank’s compliance with applicable federal and state laws, rules, and regulations relating to anti-money laundering (“AML”) policies, procedures, and practices, including the Bank Secrecy Act (“BSA”) (31 U.S.C.§ 5311 et seq.); the rules and regulations promulgated thereunder by the U.S. Department of the Treasury (31 C.F.R. Part 103); and those of the New York State Banking Department (the “Department”) (3 N.Y.C.R.R. Part 300) (collectively, “BSA/AML Requirements”);

WHEREAS, the Bank provides significant international wire transfer services and correspondent banking services, and the Department has determined that there are compliance and risk management deficiencies at the Bank in these operational areas;

WHEREAS, it is the common goal of the Department and the Bank to ensure that the Bank fully addresses all deficiencies in the Bank’s policies, procedures and procedures, internal control environment, compliance staffing, training, customer due diligence practices and suspicious activity reporting with respect to BSA/AML Requirements; and

WHEREAS, the Bank has begun to take steps to address the deficiencies described above;

WHEREAS, on August , 2007, the board of directors of the Bank, at a duly constituted meeting, adopted a resolution authorizing and directing WRichard Holmes, Chairman and Chief Executive Officer, to enter into this Written Agreement (“Agreement”) on behalf of the Bank, and consenting to compliance by the Bank with each provision of this Agreement.

NOW, THEREFORE, the Department and the Bank hereby agree as follows:

Primary Contact

1. Within 10 days of this Agreement, the Bank shall designate an officer to be responsible for coordinating and submitting to the Department the written programs, plans, procedures, and engagement letter required under the terms and conditions of this Agreement.

Anti-Money Laundering Compliance

2. Within 60 days of this Agreement, the Bank shall submit to the Department an acceptable written compliance program for the Bank that is designed to improve the Bank’s internal controls to ensure compliance with BSA/AML Requirements. The program shall include provisions for updates on an ongoing basis as necessary to incorporate amendments to the BSA/AML Requirements. At a minimum, the program shall include:

(a) improvements to the Bank’s system of internal controls for foreign correspondent banking in order to ensure compliance with all recordkeeping and reporting requirements;

(b) controls designed to ensure compliance with all requirements relating to correspondent accounts for non-U.S. persons;

(c) an assessment of legal and reputational risks associated with the Bank’s correspondent banking and funds transfer clearing activities; and

(d) adequate resources for the BSA/AML compliance officer, including sufficient staff levels, to implement and maintain an effective program for compliance with BSA/AML Requirements, and the Bank’s internal policies and procedures.

Suspicious Activity Reporting and Customer Due Diligence

3. Within 60 days of this Agreement, the Bank shall submit to the Department an acceptable written customer due diligence program designed to reasonably ensure the identification and timely, accurate, and complete reporting of all known or suspected violations of law and suspicious transactions against or involving the Bank to law enforcement and supervisory authorities as required by BSA/AML Requirements. At a minimum, the program shall include:

(a) a methodology for assigning risk levels to the Bank’s customer base, including correspondent account holders, that considers factors such as type of customer, type of product or service, and geographic location;

(b) a risk-focused assessment of the Bank’s customer base that:

(i) identifies the categories of customers whose transactions and banking activities are routine and usual; and

(ii) determines the appropriate level of enhanced due diligence necessary for those categories of customers that pose a heightened

risk of conducting potentially illicit activities at or through the Bank;

(i) determine the appropriate documentation necessary to verify the identity and business activities of the customer;

(ii) understand the normal and expected transactions of the customer based on appropriate criteria;

(iii) provide for a periodic review of the parameters of expected account activity; and.

(iv) review all international customer account files for the adequacy and timeliness of account documentation, and, where necessary, correct any deficiencies;

(d) procedures to ensure that the results of the risk assessment are communicated to senior management so that it is aware of the risk profile of the customer base;

(e) for correspondent accounts established, maintained, administered, or managed in the United States for a non-U.S. financial institution, procedures that are designed to ensure compliance with applicable due diligence and other requirements (including the provisions of 31 C.F.R. §§ 103.176 and 103.177), and that, at a minimum, provide for:

(i) obtaining and maintaining appropriate information about the respondent, its business operations, markets served, customer base, and its AML policies and procedures, particularly with respect to its customer relationships, that may present a heightened risk of money laundering or other concerns; and

(ii) ensuring that correspondent banking services provided by the Bank are reviewed and approved by senior management, and are subject to appropriate ongoing review;

(f) the establishment of policies and procedures and appropriate monitoring criteria to ensure the proper detection and timely and complete reporting of all known or suspected violations of law and suspicious or unusual transactions, including, but not limited to:

(i) effective monitoring of customer accounts and transactions, including transactions conducted through correspondent accounts;

(ii) participation by appropriate levels of management in the process of identifying, reviewing, documenting and reporting potentially suspicious activity;

(iii) adequate escalation of information about potentially suspicious activity through appropriate levels of management;

(iv) adequate procedures to ensure the accurate, timely and complete preparation and filing of Suspicious Activity Reports (“SARs”);

(v) a requirement that the investigation and resolution of all system-generated alerts are appropriately resolved, documented, and , where necessary, appropriately escalated;

(vi) procedures to ensure that suspicious transaction referrals are tracked and reconciled to ensure that they result in the filing of a timely SAR or a documented decision not to file; and

(vii) policies and procedures describing actions to be taken in the event of (1) the filing of multiple SARs for the same customer, and (2)

the failure of a correspondent banking customer to provide requested due diligence information, including the procedures to be followed in determining whether and when an account should be closed.

Independent Testing

4. Within 60 days of this Agreement, the Bank shall submit to the Department an acceptable written plan for independent testing of the Bank’s compliance with BSA/AML Requirements, to be performed on a regular basis by qualified persons who are independent of the Bank’s business lines and compliance functions. This function may be performed by Internal Audit. At a minimum, the plan shall include:

(a) procedures to evaluate the Bank’s compliance with BSA/AML Requirements, including the performance of customer due diligence and the monitoring of customer activity to ensure compliance with applicable suspicious activity reporting requirements;

(b) procedures for the review of independent testing results by senior management and escalation to the Bank’s board of directors in appropriate circumstances;

(c) procedures to ensure that senior management institutes and completes appropriate actions in response to the independent testing results;

(d) procedures to ensure that independent testing results are communicated to the Department on a regular basis and retained for subsequent supervisory review; and

(e) procedures to review the adequacy and effectiveness of the Bank’s training programs to ensure that appropriate personnel possess the requisite knowledge to comply with BSA/AML Requirements and relevant internal policies and procedures.

Transaction Monitoring System

5. (a) Within 45 days of this Agreement, the Bank shall submit to the Department an acceptable written plan, including a timetable, for a review, enhancement and verification of the adequacy of the transaction monitoring system by a qualified, independent consultant (“Consultant”) acceptable to the Department. The plan shall also include a methodology and target date for the Consultant’s determination that the transaction monitoring system is effective.

(b) Within 60 days of this Agreement, the Bank shall submit to the Department acceptable written customer account and transaction monitoring policies and procedures that are designed to effectively manage legal and reputational risks and ensure compliance with legal and regulatory requirements. The acceptable policies and procedures shall take effect upon the determination by the Consultant that the improved transaction monitoring system is fully effective. Documentation to support the determination that the improved transaction monitoring system is fully effective shall be retained for subsequent supervisory review.

Interim Transaction Monitoring Procedures

6. Within 30 days of this Agreement, the Bank shall submit to the Department acceptable written interim transaction monitoring procedures for the Bank that shall remain in

effect until the Consultant confirms, through the performance of appropriate tests, that the enhanced transaction monitoring system is fully effective. These interim procedures shall be designed to monitor the transactions of the Bank so that it can comply with applicable suspicious activity reporting requirements.

Transaction Review

7. Within 30 days of this Agreement, the Bank shall engage a qualified independent firm (the “Independent Firm”) (which may be the same consultant described in paragraph 4(a)), acceptable to the Department, to conduct a review of account and transaction activity during the time period July 1, 2006 through December 31, 2006 to determine whether suspicious activity involving accounts or transactions at, by, or through the Bank was properly identified and reported in accordance with applicable suspicious activity reporting laws and regulations (the “Transaction Review”), and to prepare a written report detailing the Independent Firm’s findings (the “Independent Firm’s Report”). The Department may, based on its evaluation of the results of the Transaction Review, direct the Bank to engage the Independent Firm to expand the scope of the Transaction Review to include an additional period or periods of time, and to prepare a second report of findings. The scope and methodology for such expanded review shall be determined in the same manner as described in paragraph 8 of this Agreement.

8. Within 10 days of the engagement of the Independent Firm, but prior to the commencement of the Transaction Review, the Bank shall submit to the Department an acceptable engagement letter that sets forth:

(a) the scope of the Transaction Review, including the types of accounts and transactions to be reviewed;

(b) the methodology for conducting the Transaction Review, including any sampling procedures to be followed;

(d) the anticipated date of completion of the Transaction Review and the Independent Firm’s Report; and

(e) a commitment on the part of the Independent Firm that any required reports shall be provided simultaneously to the Bank and the Department, and further, that interim reports, draft reports, or work papers associated with the Transaction Review will be preserved and made available to the Department upon request.

9. Throughout the Transaction Review, the Bank shall ensure that all matters or transactions required to be reported that have not been previously reported are reported in accordance with applicable rules and regulations.

Training

10. Within sixty (60) days of the effective date of this Written Agreement, the Bank shall submit a written plan, acceptable to the Department that is designed to improve current training at the Bank with respect to BSA/AML Requirements. Such plan shall further provide for the testing of the effectiveness of such training. Individual employee training shall be tracked in order to ensure that employees are qualified to perform their assigned duties. The training shall extend to all aspects of regulatory and internal policies and procedures related to BSA/AML Requirements, and shall include measures designed to ensure that the training is sufficiently tailored to the particular duties of the employees, and the activities conducted by the Bank. The

plan shall provide for periodic training updates to provide reasonable assurance that all appropriate personnel are trained in the most current BSA/AML Requirements.

Approval, Implementation, and Progress Reports

11. (a) The Bank shall submit written programs, plans, policies, procedures, and an engagement letter that are acceptable to the Department within the applicable time periods set forth in paragraphs 2 through 8 and 10 of this Agreement.

(b) Within 10 days of acceptance by the Department, the Bank shall adopt the approved programs, plans, policies, procedures, and engagement letter. Upon adoption, the Bank shall implement the approved programs, plans, policies, and procedures and thereafter fully comply with them.

(c) During the term of this Agreement, the accepted programs, plans, policies, procedures, and engagement letter shall not be amended or rescinded without the prior written approval of the Department.

12. On the first business day of each month following the date of this Agreement, the Bank shall submit to the Department written progress reports detailing the form and manner of all actions taken to secure compliance with the provisions of this Agreement and the results thereof. Management responses to any audit reports covering BSA/AML Requirements prepared by internal and external auditors shall be included with the progress reports. The Department may, in writing, discontinue the requirement for progress reports or modify the reporting schedule.

Notices

13. All communications regarding this Agreement shall be sent to:

(a) Mr. David S. Fredsall

Deputy Superintendent

New York State Banking Department

One State Street

New York, New York 10004

(b) James D. Stubbs

Chief Compliance Officer

American Express Bank Ltd.

Three World Financial Center

200 Vesey Street

New York, NY 10285

Miscellaneous

14. The provisions of this Agreement shall be binding on the Bank and its successors and assigns.

15. Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated or suspended in writing by the Department. If, while this Agreement is in effect, the Bank or its parent companies are parties to a definitive contract to sell the Bank, or otherwise transfer substantially all of the Bank’s assets and liabilities to an unaffiliated third party, the Bank shall promptly notify the Department, which shall have discretion to stay, modify, terminate or suspend any or all of the provisions of this Agreement.

16. Notwithstanding any provision of this Agreement, the Department may, in its sole discretion, grant written extensions of time to the Bank to comply with any provision of this Agreement.

17. The provisions of this Agreement shall not bar, estop, or otherwise prevent the Department or any other federal or state agency from taking any further or other action affecting the Bank or any of its successors or assigns.

18. This Agreement is enforceable by the Department pursuant to Section 39 of the New York Banking Law.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 6th day of August, 2007.

AMERICAN EXPRESS BANK LTD.			NEW YORK STATE BANKING DEPARTMENT


By:	/s/ Mr. WRichard Holmes		By:	/s/ Mr. David S. Fredsall
		Mr. WRichard Holmes Chairman and Chief Executive Officer			Mr. David S. Fredsall Deputy Superintendent of Banks