1. THE WASHINGTON PERSPECTIVE: ENFORCEMENT IS ON THE RISE November 3, 2010 Michael Volkov Title (202) 263-3288 MVolkov@mayerbrown.com 20965470.1

2. AAGLanny Breuer of the US Justice Department’s Criminal Division October 19, 2010 speech at Money Laundering Enforcement Conference Aggressive new efforts to prosecute banks and other financial institutions for money laundering and other financial crimes. Trying to Recreate FCPA Enforcement Model Based on Large Fines, Individual Prosecutions, and Self Reporting 2

3. Warnings to Financial Institutions AAG Breuer warned banks by highlighting several recent prosecutions where financial institutions ignored anti-money laundering compliance failed to devote sufficient resources to their Bank Secrecy Act and anti-money laundering programs Since 2002, the Justice Department has prosecuted at least 15 different banks – among them Lloyds, Credit Suisse, Wachovia, and Barclays. In the last three years banks have forfeited nearly $1.5 billion dollars. 3

4. New Criminal Enforcement Initiatives:New Money Laundering and Bank Integrity Unit Focus On financial institutions, including their officers, managers, and employees; professional money launderers who sell their services to criminal organizations; and those engaged in using the latest and most sophisticated money laundering techniques Staff will be “prosecutors and lawyers from the banking industry.” 4

5. The Kleptocracy Asset Recovery Initiative Target and Seize foreign corruption proceeds. The Asset Forfeiture and Money Laundering Section will lead it with the Office of International Affairs and the Fraud Section. To recover assets on behalf of countries victimized by high-level corruption, building on the FCPA. 5

6. Enhanced Enforcement Against Bank Individuals Executives and Officers will be targeted if they “cheat, deceive or defraud”. June 2010: indicted Lee Bentley Farkas, the former chairman of Taylor, Bean & Whitaker Mortgage Corporation, one of the largest private mortgage companies in the United States. July 2010: Two Vice Presidents of Integrity Bank, a $1 billion financial institution, pleaded guilty to various crimes, including insider trading of Integrity stock, conspiracy to provide bogus loans in exchange for cash bribes. 6

7. Encouraging Cooperation AAG Breuer urged banks and individuals to come forward and fully cooperate in order to earn “meaningful credit”. Many options are available to the Justice Department short of prosecution when a banking entity has been truly cooperative: no charges may be brought at all, deferred prosecution agreement or non-prosecution agreement, sentencing credit, or a below-Guidelines fine. 7

8. Case Example: Barclays Bank In May 2006, Barclays voluntarily disclosed to the Office of Foreign Assets Control four transactions that violated U.S. sanctions. Barclays conducted a limited internal investigation and terminated all banking relationship with banks subject to U.S. economic sanctions, and banks headquartered in sanctioned countries. In 2007, after a comprehensive internal investigation, Barclays shared the results of its internal investigation with federal and state prosecutors and regulators. The case was resolved through a deferred prosecution agreement, a forfeiture of $298 million, and compliance by the bank for a period of two years. 8

9. Small and Large Banks Pamrapo Savings Bank, a small community bank in New Jersey that pleaded guilty for failing to file CTRs and SARs related to approximately $35 million in illegal and suspicious transactions, including more than $5 million in structured currency transactions. Wachovia, which admitted in March in a deferred prosecution after admitting to allowing at least $110 million of drug proceeds to flow unimpeded through its accounts. 9

11. As part of a deferred prosecution agreement with the Justice Department relating to this conduct, Credit Suisse forfeited $536 million dollars to the government. 10

12. What You Can Count On for the Near Future? Criminal Indictments of Banks -- Large and Small -- Will Increase Criminal Indictments of Executives and Officers Will Increase More Assets Will Be Seized 11

13. What Can You Do? Re-Examine and Improve AML, Bank Secrecy and OFAC Compliance Programs. Increase Compliance Resources. AAG Breuer warned financial institutions. to set up “an effective compliance program to detect and report suspicious activity means accruing significant expenses for technology, personnel, and training”. financial institutions cannot cut corners on compliance: having a compliance program that works is worth it. failure to adopt and maintain a real compliance structure will have serious consequences. 12

14. HSBC: Recent Enforcement Actions Provide a Basic Checklist Senate Permanent Subcommittee on Investigations Referred HSBC for federal investigation for money laundering and Bank Secrecy violations. Criminal investigation is ongoing and will result in significant penalties. resulted in civil and criminal enforcement actions. 13

15. HSBC: Federal Reserve and Office of Comptroller of Currency OCC and the Federal Reserve required HSBC BankUSA to take significant corrective actions to improve itsAnti-Money Laundering compliance program. 30 days to submit a plan to strengthen oversight of business risk management. HSBC must (1) "employ a permanent full-time" regional compliance officer for risk management; and (2) retain an outside consultant approved by the Fed to review it compliance program. HSBC is still under criminal investigation by the Justice Department. 14

16. HSBC: Specific Deficiencies in Compliance Program Did not have a designated compliance officer, and combined the legal and compliance functions into one office. Poor suspicious activity reporting. Weak monitoring of bulk cash purchases and international funds transfers. Slow and inaccurate customer due diligence concerning its foreign affiliates. Slow risk assessment with respect to politically-exposed persons and their associates. Controls were insufficient to screen customers and parties to various transactions. Processed alerts from its own internal monitoring system slowly because of lack of manpower. 15

17. Wachovia Bank: $160 million Wachovia Bank entered into Deferred Prosecution Agreement and paid $160 million for failure of its controls to prevent drug traffickers from laundering $420 billion in drug money. Wachovia accounts took in at least $373 billion in wire transfers that were made from Mexican exchange accounts. $4 billion in bulk cash was shipped from Mexican exchange accounts to Wachovia Wachovia also operated a "remote deposit capture" service that took in another $47 billion. 16

18. Wachovia Compliance Program Deficiencies Financial institutions must maintain anti-money laundering compliance programs and policies that are adequate to identify, analyze and report suspicious activity. Wachovia failed to conduct appropriate customer due diligence by delegating most of this responsibility to business units instead of compliance personnel. to monitor high return rates for remotely-created checks and report suspicious wire transfer activity from the processors’ accounts. Wachovia spent $42 million to improve its compliance program. 17

19. What Needs to Be Done Protect and Prevent Potential Costly Investigations and Prosecutions Aggressive Techniques Will be Used Undercover officers Search Warrants Wiretaps Consensual Recordings – Telephone and Meetings Compliance Programs Must be Improved Relationships Must be Maintained and Improved with Regulators and Law Enforcement 18