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. Last Updated: 07/27/2016

N.Y. Bank Busted in Laundering Inquiry

NEW YORK -- A small Manhattan bank that prosecutors said accepted duffel bags full of cash without raising questions about its origins pleaded guilty Wednesday to violating federal money laundering rules in what the U.S. government called the first case of its kind.

Broadway National Bank pleaded guilty before Judge Thomas Griesa of the U.S. District Court in Manhattan to three felony charges for failing to file suspicious activity reports on $123 million in cash deposits and failing to establish an anti-money-laundering program. It will pay a $4 million fine under a plea agreement. Prosecutors said the case was the first time a bank had been prosecuted for violating those laws.

"This bank had become the bank of choice for criminal organizations because it didn't ask questions and didn't want to know where the money came from," said Dean Boyd, a spokesman for the U.S. Customs Service, which assisted in the investigation of the bank.

Between 1996 and 1998, the bank failed to report hundreds of bulk cash deposits totaling more than $46 million and thousands of transfers structured to avoid federal disclosure laws, prosecutors said. Once the cash was deposited, often in large duffel bags, it was wired to accounts in Latin America and the Middle East, including several well-known money-laundering havens, they said.

William Pollard, a lawyer for Broadway National, said in the plea agreement that "at no time did the bank know, believe or suspect" that any of the suspicious deposits were derived from illegal activity or consciously avoid learning the source of the money.

About a dozen people have been arrested in the narcotics and money laundering schemes that generated the cash that flowed through Broadway National, prosecutors said. There are no indications that any of the money was linked to terrorism. No bank employees have been charged, prosecutors said. Broadway National, which was founded in 1986 and has three branches in New York has been operating under federal supervision since 1998.

Under the federal Bank Secrecy Act, banks must establish anti-money-laundering programs that help to identify suspicious transactions and report them to the Treasury Department. They must report all cash transfers of more than $10,000 and must be vigilant for attempts to evade that limit by dividing transfers into packages of $10,000 or less.

At Broadway National, customers structured about $76 million in cash transfers with the intent of evading U.S. disclosure rules over a two-year period, prosecutors said. That amount included $20 million in accounts maintained by members or associates of the Fares family, five of whose members have been convicted of laundering drug money.

A man named Alfred Dauber deposited about $46 million into nine accounts at Broadway, sometimes in cash installments as large as $660,000, prosecutors said. Dauber has pleaded guilty to laundering money on behalf of a Colombian drug cartel.

A Broadway executive who was a member of the bank's board once remarked that Dauber should not be invited to the bank's annual Christmas party because "for all we know, Dauber is a drug dealer," according to sentencing documents.