Post by anenro on Jul 21, 2023 21:01:05 GMT 4
Former Bank Compliance Chief Seeks Appellate Review of OCC Administrative Enforcement Proceeding Dismissal
In an unusual move, Laura Akahoshi, former Rabobank (the “Bank”) Chief Compliance Officer (“CCO”), filed on July 6, 2023 an opposition to the Office of the Comptroller of the Currency’s (“OCC”) dismissal of its own administrative enforcement proceeding against her. Akahoshi filed her petition in the U.S. Ninth Circuit Court of Appeals, arguing in part that the Administrative Procedures Act and 18 U.S.C. § 1818 provide the court with jurisdiction to review the OCC’s dismissal.
The OCC’s initial enforcement proceeding stemmed from allegations that Akahoshi participated in an effort to withhold information from an OCC examiner in connection with an examination of the Bank’s Bank Secrecy Act (“BSA”)/Anti-Money Laundering (“AML”) program. Specifically, the OCC alleged that Akahoshi had committed misconduct by failing to provide a report created by a third-party consulting firm regarding the adequacy of the Bank’s BSA/AML program.
The case against Akahoshi was one of several administrative enforcement actions that the OCC pursued after Rabobank NA agreed in February 2018 to pay more than $360 million in AML-related settlements reached with the U.S. Department of Justice (“DOJ”) and the OCC. As we previously blogged, the Bank’s former general counsel Daniel Weiss entered into a 2019 Consent Order in which he agreed to be barred from the banking industry and to pay a $50,000 fine. Many of the allegations contained within the Notice of Charges against Akahoshi mirrored those contained within the Notice of Charges against Weiss.
Akahoshi’s efforts face significant legal challenges, as exemplified by the fact that, as we discuss, an ALJ recently denied her application for the $4.2 million in attorney fees and costs that she expended defending herself against the OCC enforcement action. Nonetheless, the matter highlights several important and inter-related issues: the potential liability of individuals for alleged AML compliance failures, and the related powers of regulators; the potential tensions between the interests of individual AML compliance personnel and the financial institution; the role of whistleblowers; and how regulators and the government can use AML compliance audits and reviews by third-party consultants – which can vary greatly in quality, and sometimes can double as stealth business pitches by the consultants – as a sword against the institution.
The Notice of Charges
The Notice of Charges against Akahoshi – herself a former OCC examiner – alleged that in July 2012, not long after she transitioned from her role as the Bank’s CCO to become Compliance Manager of Rabobank International in the Netherlands, her replacement “identified serious deficiencies in the Bank’s BSA/AML program and communicated her findings to Bank Management.” Management disagreed. Shortly thereafter, the OCC began an examination of the Bank’s BSA/AML compliance program.
In December 2012, and partly in response to concerns raised by Akahoshi’s replacement, the Bank contracted with a consulting firm to provide “an independent, written assessment of the Bank’s BSA/AML compliance program[.]” Allegedly, the findings of the consulting firm corroborated the findings of the former CCO that the program was deficient in several significant ways. Later, the former CCO turned into a whistleblower and gave the audit firm’s report to the OCC, which responded by resuming its 2012 examination of the Bank’s BSA/AML compliance program.
Most pertinently, according to the Notice of Charges, the Bank “did not disclose the existence of the [audit firm’s report], or acknowledge its findings, which corroborated the OCC’s examination findings.” It is perhaps slightly unnerving that the government would focus its case on the alleged failure to immediately turn over a report by a third-party hired to enhance compliance. That general enforcement approach, if taken to extremes, could have significant implications for financial institutions and the consulting and legal service providers in their orbit.
While simultaneously noting his reluctance to do so, the OCC’s Acting Comptroller Michael Hsu dismissed the 2018 case against Akahoshi in April of this year, despite the recommendation of an OCC Administrative Law Judge (“ALJ”) to grant summary judgment to the agency, fine Akahoshi $30,000, and ban her from banking, much like the penalty imposed upon Weiss back in 2019. Hsu opted not to adopt the recommended decision, finding that “[t]he ALJ’s recommended findings of fact and conclusions of law [were] predicated upon a misapplication of the summary disposition standard and [did] not form an adequate basis for the Comptroller to assess a [civil money penalty] or a prohibition order.” Acting Comptroller Hsu’s expression of reluctance regarding the dismissal, as well as other negative statements made about Akahoshi throughout the very detailed and lengthy dismissal, are what form the basis of Akahoshi’s argument that the Ninth Circuit has jurisdiction to review the dismissal: even though Akahoshi was never assessed a monetary penalty, she nonetheless has suffered a real-world injury, courtesy of the OCC. For example, the dismissal states:
Based on the evidence in the current record, Rabobank executives appear to have demonstrated a troubling lack of responsiveness to OCC demands. The record shows that Respondent received a direct request from an OCC examiner to provide “a copy of the [Crowe] assessment report” on March 21, 2013. Instead of immediately furnishing all documents (i) within their possession and control and (ii) plainly responsive to the examiner’s request, Respondent and her colleagues waited nearly a month before taking steps to hand them over. One plausible interpretation of the record is that Respondent and others adopted a strategy of deflection and delay designed to hinder the OCC’s efforts (reflected by multiple written and oral requests) to collect these materials. This unacceptable delay – and, more troubling, possible lack of candor – is exactly the type of conduct that the OCC’s enforcement authority is designed to deter.
As Akahoshi notes, such commentary was totally unnecessary to effectuating a voluntary dismissal. Summarizing greatly, Akahoshi obviously rejects the above interpretation throughout her pleadings, and vigorously argues that she was entirely candid with the OCC: at most, there had been a misunderstanding for a very brief period of time between the OCC, herself and others at the Bank. Akahoshi also stresses that certain emails to the OCC drafted or sent by herself or others at the bank which criticized the consultant’s work as “seriously flawed,” based on inaccurate information, and proposing a lengthy and costly remediation plan were, in fact, true.
The Application for Attorney Fees
Unsatisfied with the dismissal, Akahoshi, has accused the OCC of mismanaging the case from start to finish and now trying to cover up its errors by dismissing the case.
This sentiment was echoed in Akahoshi’s Application for an Award of Attorneys’ Fees and Costs Pursuant to the Equal Access to Justice Act, which was filed on May 5, 2023 (the “EAJA Application”), seeking defense attorneys’ fees and other legal costs totaling more than $4 million. In the EAJA Application, Akahoshi alleges that “[t]he Acting Comptroller dismissed the action, ostensibly based on the passage of time and alleged errors by [the OCC], but the OCC’s ulterior motive in doing so is clear—to try to avoid subjecting the OCC’s conduct to review in a federal court of appeals.” Akahoshi does not mince words in her efforts to express her fury towards the OCC, stating that its enforcement action was “a false statements case without false statements; a concealment case without concealment, and a case about failing to disclosure documents that were disclosed on the exact timeframe to which the OCC agreed.”
An ALJ from the Office of Financial Institution Adjudication denied Akahoshi’s EAJA Application on June 14, 2023, finding that Akahoshi’s “contention that the agency’s position in this case was not substantially justified—as necessary for an award under the EAJA—rests on factual and legal arguments that the undersigned has already considered and deemed non-meritorious over the course of the proceeding.” Specifically, the ALJ previously had found that undisputed material facts supported a grant of summary judgment in favor of the OCC regarding “certain aspects of the statutory elements of misconduct, culpability and effect[,]” including that Akahoshi had violated the law, and caused the Bank to violate the law, by failing “to provide the Crowe Report to OCC examiners upon request in March 2013, despite knowingly having that document in her possession and understanding it to be responsive to the OCC’s inquiry.”
Akahoshi’s attorneys have indicated that she intends to appeal this denial in federal court.
Shortly after the EAJA Application denial, Akahoshi filed her Ninth Circuit petition for review. Among the highlights of the petition is Akahoshi’s barb that “[t]he OCC believes it can drag a respondent through the mud for years, at ruinous reputational and financial costs to her, then evade review by this court simply by dismissing the action after much of the harm has already been done.”
While Akahoshi’s efforts to hold the OCC accountable may face an uphill legal battle, her petition for review raises interesting procedural issues. For instance, if she were to prevail, the OCC has argued that an invalidation of the dismissal would only revive the case. Akahoshi rejects this claim, stating that portions of the dismissal could be stricken or the entire enforcement proceeding could be invalidated from its inception. Nevertheless, Akahoshi’s efforts to curb the OCC’s authority has the potential to pay dividends for future individual targets of the OCC’s enforcement actions, particularly because the OCC otherwise could attempt to rely on the dismissal’s conclusions regarding the OCC’s perception of attempted obstruction as favorable precedent in the future, if left unchallenged.
Final Considerations
Akahoshi’s case obviously implicates the ongoing issue of the potential liability of individuals for alleged AML failures – an issue which can pit the interests of individual compliance personnel against the interests of the financial institution. The potential tensions between individual and institutional interests in BSA/AML compliance and enforcement may be highlighted further if the relatively new whistleblower provisions of the Anti-Money Laundering Act of 2020 incentivize compliance personnel to “blow the whistle” – appropriately or not – more often or more quickly because they are concerned that, otherwise, they will become the focus of regulatory and prosecutorial attention because they are at the center of the compliance problems at issue.
In an unusual move, Laura Akahoshi, former Rabobank (the “Bank”) Chief Compliance Officer (“CCO”), filed on July 6, 2023 an opposition to the Office of the Comptroller of the Currency’s (“OCC”) dismissal of its own administrative enforcement proceeding against her. Akahoshi filed her petition in the U.S. Ninth Circuit Court of Appeals, arguing in part that the Administrative Procedures Act and 18 U.S.C. § 1818 provide the court with jurisdiction to review the OCC’s dismissal.
The OCC’s initial enforcement proceeding stemmed from allegations that Akahoshi participated in an effort to withhold information from an OCC examiner in connection with an examination of the Bank’s Bank Secrecy Act (“BSA”)/Anti-Money Laundering (“AML”) program. Specifically, the OCC alleged that Akahoshi had committed misconduct by failing to provide a report created by a third-party consulting firm regarding the adequacy of the Bank’s BSA/AML program.
The case against Akahoshi was one of several administrative enforcement actions that the OCC pursued after Rabobank NA agreed in February 2018 to pay more than $360 million in AML-related settlements reached with the U.S. Department of Justice (“DOJ”) and the OCC. As we previously blogged, the Bank’s former general counsel Daniel Weiss entered into a 2019 Consent Order in which he agreed to be barred from the banking industry and to pay a $50,000 fine. Many of the allegations contained within the Notice of Charges against Akahoshi mirrored those contained within the Notice of Charges against Weiss.
Akahoshi’s efforts face significant legal challenges, as exemplified by the fact that, as we discuss, an ALJ recently denied her application for the $4.2 million in attorney fees and costs that she expended defending herself against the OCC enforcement action. Nonetheless, the matter highlights several important and inter-related issues: the potential liability of individuals for alleged AML compliance failures, and the related powers of regulators; the potential tensions between the interests of individual AML compliance personnel and the financial institution; the role of whistleblowers; and how regulators and the government can use AML compliance audits and reviews by third-party consultants – which can vary greatly in quality, and sometimes can double as stealth business pitches by the consultants – as a sword against the institution.
The Notice of Charges
The Notice of Charges against Akahoshi – herself a former OCC examiner – alleged that in July 2012, not long after she transitioned from her role as the Bank’s CCO to become Compliance Manager of Rabobank International in the Netherlands, her replacement “identified serious deficiencies in the Bank’s BSA/AML program and communicated her findings to Bank Management.” Management disagreed. Shortly thereafter, the OCC began an examination of the Bank’s BSA/AML compliance program.
In December 2012, and partly in response to concerns raised by Akahoshi’s replacement, the Bank contracted with a consulting firm to provide “an independent, written assessment of the Bank’s BSA/AML compliance program[.]” Allegedly, the findings of the consulting firm corroborated the findings of the former CCO that the program was deficient in several significant ways. Later, the former CCO turned into a whistleblower and gave the audit firm’s report to the OCC, which responded by resuming its 2012 examination of the Bank’s BSA/AML compliance program.
Most pertinently, according to the Notice of Charges, the Bank “did not disclose the existence of the [audit firm’s report], or acknowledge its findings, which corroborated the OCC’s examination findings.” It is perhaps slightly unnerving that the government would focus its case on the alleged failure to immediately turn over a report by a third-party hired to enhance compliance. That general enforcement approach, if taken to extremes, could have significant implications for financial institutions and the consulting and legal service providers in their orbit.
While simultaneously noting his reluctance to do so, the OCC’s Acting Comptroller Michael Hsu dismissed the 2018 case against Akahoshi in April of this year, despite the recommendation of an OCC Administrative Law Judge (“ALJ”) to grant summary judgment to the agency, fine Akahoshi $30,000, and ban her from banking, much like the penalty imposed upon Weiss back in 2019. Hsu opted not to adopt the recommended decision, finding that “[t]he ALJ’s recommended findings of fact and conclusions of law [were] predicated upon a misapplication of the summary disposition standard and [did] not form an adequate basis for the Comptroller to assess a [civil money penalty] or a prohibition order.” Acting Comptroller Hsu’s expression of reluctance regarding the dismissal, as well as other negative statements made about Akahoshi throughout the very detailed and lengthy dismissal, are what form the basis of Akahoshi’s argument that the Ninth Circuit has jurisdiction to review the dismissal: even though Akahoshi was never assessed a monetary penalty, she nonetheless has suffered a real-world injury, courtesy of the OCC. For example, the dismissal states:
Based on the evidence in the current record, Rabobank executives appear to have demonstrated a troubling lack of responsiveness to OCC demands. The record shows that Respondent received a direct request from an OCC examiner to provide “a copy of the [Crowe] assessment report” on March 21, 2013. Instead of immediately furnishing all documents (i) within their possession and control and (ii) plainly responsive to the examiner’s request, Respondent and her colleagues waited nearly a month before taking steps to hand them over. One plausible interpretation of the record is that Respondent and others adopted a strategy of deflection and delay designed to hinder the OCC’s efforts (reflected by multiple written and oral requests) to collect these materials. This unacceptable delay – and, more troubling, possible lack of candor – is exactly the type of conduct that the OCC’s enforcement authority is designed to deter.
As Akahoshi notes, such commentary was totally unnecessary to effectuating a voluntary dismissal. Summarizing greatly, Akahoshi obviously rejects the above interpretation throughout her pleadings, and vigorously argues that she was entirely candid with the OCC: at most, there had been a misunderstanding for a very brief period of time between the OCC, herself and others at the Bank. Akahoshi also stresses that certain emails to the OCC drafted or sent by herself or others at the bank which criticized the consultant’s work as “seriously flawed,” based on inaccurate information, and proposing a lengthy and costly remediation plan were, in fact, true.
The Application for Attorney Fees
Unsatisfied with the dismissal, Akahoshi, has accused the OCC of mismanaging the case from start to finish and now trying to cover up its errors by dismissing the case.
This sentiment was echoed in Akahoshi’s Application for an Award of Attorneys’ Fees and Costs Pursuant to the Equal Access to Justice Act, which was filed on May 5, 2023 (the “EAJA Application”), seeking defense attorneys’ fees and other legal costs totaling more than $4 million. In the EAJA Application, Akahoshi alleges that “[t]he Acting Comptroller dismissed the action, ostensibly based on the passage of time and alleged errors by [the OCC], but the OCC’s ulterior motive in doing so is clear—to try to avoid subjecting the OCC’s conduct to review in a federal court of appeals.” Akahoshi does not mince words in her efforts to express her fury towards the OCC, stating that its enforcement action was “a false statements case without false statements; a concealment case without concealment, and a case about failing to disclosure documents that were disclosed on the exact timeframe to which the OCC agreed.”
An ALJ from the Office of Financial Institution Adjudication denied Akahoshi’s EAJA Application on June 14, 2023, finding that Akahoshi’s “contention that the agency’s position in this case was not substantially justified—as necessary for an award under the EAJA—rests on factual and legal arguments that the undersigned has already considered and deemed non-meritorious over the course of the proceeding.” Specifically, the ALJ previously had found that undisputed material facts supported a grant of summary judgment in favor of the OCC regarding “certain aspects of the statutory elements of misconduct, culpability and effect[,]” including that Akahoshi had violated the law, and caused the Bank to violate the law, by failing “to provide the Crowe Report to OCC examiners upon request in March 2013, despite knowingly having that document in her possession and understanding it to be responsive to the OCC’s inquiry.”
Akahoshi’s attorneys have indicated that she intends to appeal this denial in federal court.
Shortly after the EAJA Application denial, Akahoshi filed her Ninth Circuit petition for review. Among the highlights of the petition is Akahoshi’s barb that “[t]he OCC believes it can drag a respondent through the mud for years, at ruinous reputational and financial costs to her, then evade review by this court simply by dismissing the action after much of the harm has already been done.”
While Akahoshi’s efforts to hold the OCC accountable may face an uphill legal battle, her petition for review raises interesting procedural issues. For instance, if she were to prevail, the OCC has argued that an invalidation of the dismissal would only revive the case. Akahoshi rejects this claim, stating that portions of the dismissal could be stricken or the entire enforcement proceeding could be invalidated from its inception. Nevertheless, Akahoshi’s efforts to curb the OCC’s authority has the potential to pay dividends for future individual targets of the OCC’s enforcement actions, particularly because the OCC otherwise could attempt to rely on the dismissal’s conclusions regarding the OCC’s perception of attempted obstruction as favorable precedent in the future, if left unchallenged.
Final Considerations
Akahoshi’s case obviously implicates the ongoing issue of the potential liability of individuals for alleged AML failures – an issue which can pit the interests of individual compliance personnel against the interests of the financial institution. The potential tensions between individual and institutional interests in BSA/AML compliance and enforcement may be highlighted further if the relatively new whistleblower provisions of the Anti-Money Laundering Act of 2020 incentivize compliance personnel to “blow the whistle” – appropriately or not – more often or more quickly because they are concerned that, otherwise, they will become the focus of regulatory and prosecutorial attention because they are at the center of the compliance problems at issue.