Source: United States Department of Justice Criminal Division
Note: A copy of the non-prosecution agreement and statement of facts can be found here.
EagleBank, a community bank with operations in Maryland, Virginia, and the District of Columbia, and its parent entity, Eagle Bancorp Inc. (collectively, EagleBank), entered into a non-prosecution agreement today and agreed to pay over $9.7 million to resolve the Justice Department’s investigation into violations of the Bank Secrecy Act.
“For more than a decade, EagleBank knowingly allowed favored clients to operate a check kiting scheme, even as compliance personnel repeatedly tried to stop it,” said Assistant Attorney General A. Tysen Duva of the Justice Department’s Criminal Division. “Financial institutions are the first line of defense against financial crimes and must be gatekeepers, not gateways, for criminal activity. As this resolution makes clear, when banks deliberately allow unlawful conduct to persist, the Criminal Division will ensure they are held accountable.”
“It is simply unacceptable for financial institutions to permit fraud under their noses,” said U.S. Attorney Brian D. Miller for the Middle District of Pennsylvania. “Our office is determined to investigate corporate crimes and fight financial fraud. We thank our partners for working with us.”
“EagleBank’s failure to stop major fraud weakened the financial system and enabled criminal activity,” said Assistant Director Heith Janke of the FBI’s Criminal Division. “The FBI will continue working with partners to hold institutions accountable and protect the public.”
According to the non-prosecution agreement, EagleBank admits that between 2010 and 2021, it willfully failed to establish an anti-money laundering and countering the financing of terrorism (AML/CFT) program, in violation of the Bank Secrecy Act. In one instance, the bank admits that it allowed two customers, a son and his father, to operate a check kiting scheme for more than a decade through accounts at EagleBank. Check kiting is a form of fraud in which an accountholder writes a check for an amount greater than the amount available in the account and deposits that check into an account at a different bank, with the intent that the second bank will credit the funds to the second account before discovering the check was not supported by sufficient funds. Fraudsters frequently continue to write bad checks, often in a circular pattern amongst banks, to nominally cover overdrafts by continuing to take advantage of the delay in processing checks.
In this case, the father was a friend and business partner of EagleBank’s former chairman and CEO, who resigned in 2019. Over the course of the scheme, senior bank executives repeatedly overrode the efforts of compliance personnel to close the accounts and end the illicit conduct. EagleBank’s facilitation of this scheme resulted in a loss of almost $6.3 million to another financial institution.
Under the terms of the non-prosecution agreement, EagleBank agreed to pay the United States a fine of $9,057,821.62 and forfeiture of $736,515. The forfeiture amount consists of EagleBank’s proceeds from overdraft fees on the accounts involved in the check kiting scheme. EagleBank has further agreed to take additional remedial measures to strengthen its AML/CFT program, to cooperate with the Department’s investigation, and to report any violations of federal criminal law to the Department.
The FBI investigated the case.
This case is being prosecuted by Chief Michael P. Grady of the Bank Integrity Unit of the Criminal Division’s Money Laundering, Narcotics and Forfeiture Section and Assistant U.S. Attorney Ravi Romel Sharma for the Middle District of Pennsylvania.
The Money Laundering, Narcotics and Forfeiture Section’s (MNF) mission is to take the profit out of crime, eliminate drug cartels, and protect the U.S. financial system. MNF pursues criminal prosecutions and criminal and civil asset recovery actions involving: financial facilitators who launder profits for criminals; financial institutions and their officers and employees whose actions threaten the U.S. financial system and financial institutions; international money launderers who support transnational organized crime; and the top command and control of international drug trafficking organizations.
MNF’s Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers and employees whose actions threaten the integrity of the individual institution or the wider financial system.