US: “A little knowledge is a dangerous thing” – holding board members responsible for compliance breaches
10 Nov 2016

Recent anti-money laundering enforcement actions against major U.S. financial institutions have placed boards of directors front and center in the management and oversight of their institutions’ Bank Secrecy Act and other anti-money laundering (“BSA/AML”) programs. Indeed, the enforcement actions have routinely imposed upon each board the responsibility to “ensure” that their institution “achieves and thereafter maintains” compliance with the conditions imposed on the institution in connection with resolution of the action.[1]

What kind and detail of information should a board require and review to fulfill its BSA/AML compliance oversight obligations? A recent decision by the Court of Chancery in Delaware in a shareholder’s derivative action against Capital One Financial Corporation (“Capital One”) and its board for breach of fiduciary duty with regard to Capital One’s AML program is instructive. In this case, the Court dismissed the plaintiff’s complaint for failure to establish that the board consciously allowed Capital One to violate BSA/AML statutory requirements. But the fact of the suit highlights a new and serious liability risk inherent in board membership, and the Court’s decision underscores the fine line walked by boards of directors who are executing their BSA/AML compliance-related responsibilities.

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