In the Matter of Baltic Financial Services, Inc.

UNITED STATES OF AMERICA DEPARTIVffiNT OF THE TREASURY FINANCIAL CRIMES ENFORCEMENT NETWORK IN THE MATTER OF: BALTIC FINANCIAL SERVICES, INC. MONTCLAIR, NEW JERSEY ) ) ) ) ) Number 2010-5 ASSESSMENT OF CIVIL MONEY PENALTY I. INTRODUCTION Under the authority of the Bank Secrecy Act and regu lations issued pursuant to that Act, the Financial Crimes Enforcement Network has determined that grounds exist to assess a civil money penalty against Baltic Financial Services, Inc. ("Baltic" or the "Money Services Business").' To resolve this matter, and only for that purpose, Baltic has entered into a CONSENT TO THE ASSESSMENT OF CIVIL MONEY PENALTY ("CONSENT") without admitting or denying the determinations by the Fi nancial Crimes Enforcement Network, as described in Sections III and IV below, except as to jurisdiction in Section 11 below, which is admitted. The CONSENT is incorporated into the ASSESSMENT OF CIVIL MONEY PENALTY ("ASS ESSMENT") by this reference. ll. JURISDICTION Baltic is an independent money transmitter, located in Montcl air, New Jersey. The privately owned company is a New Jersey corporati on, with assets amounting to approximately $76,000. Baltic markets funds transfer services to and from Latvia, a "major money laundering country.,,2 At all relevant times, Baltic was a "money services business," "money transmitter" and " financ ial institution" within the meaning of the Bank Secrecy Act and its implementing regul ations.3 The Internal Revenue Service, Sma ll Business/Sel f-Employed Di vision examines money services businesses for compliance with the Bank Secrecy Act, under delegated authority from the Financial I 3 1 U.S.C. § 53 1 I et seq. "nd 3 1 C.F. R. Pmt 103. 2 United States Department of State Internation,,1 Narcoti cs Control Strategy Reports (HINCSRs") for 2006,2007,2008, 2009. and 2010 identified Latvia tiS a "major money laundering cOllntry," The term means it country whose financial institutions engage in currency Iransnctiol1 s in volving significant amounts of proceeds frol11 inlernationainnrcotics 'r"fficking. 22 U.S.c. § 229 1 (e)(7). J 3 1 U.S.C. § 53 12(a)(2) "nd 3 1 C.F.R. § 103. 11.

Crimes Enforcement Network. 4 The State of New Jersey Department of Banking and Insurance examines money servi ces businesses for compli ance with anti-money lau ndering requireme nts, uncleI' laws of the State of New Jersey. Ill. DETERMINATIONS The Financial Crimes Enforcement Network has determined that Ballic vio lated Bank Secrecy Act registration requirements for money services businesses$ Since 200 I, the Bank Secrccy Act has required certain money transmitters to register with FinCEN by fi ling a registrat ion of money services business (H RMSB") form, and renewing the registration every two years. If the money services business' ownership or number of agents changes, a re-registration requirement may apply. Bank Sec recy Act compliance by money services businesses is a critical part of the government's efforts against money laundering, terrorist financing, and other financ ial crimes. Bank Secrecy Act forms, inc luding RMSB forms, must be filed in an accurate, complete and timely manner. The registration requirement is an initial and fo undationa l step required as part of the Financia l Crimes Enforcement Network's regulations that are intended to assist law enforceme nt and other government agencies in the enforcement of criminal, tax and regulatory laws, and to prevent money services businesses from engaging in, or being misused to facilitate, the flow of illic it proceeds 6 By mitigating the risk of criminal abuse of money services businesses, the Financial Crimes Enforcement Network's regu latory framework seeks to promote the provision of legitimate financial services to consumers, in particular the unbanked and underbanked. RMSB forms promote greater transpa rency with respect to money services businesses that serve as gateways to the U.S. financia l system, and are an integral part of highly useful invest igative audit trails uti li zed by law enforcement, the Financial Crimes Enforcement Network and other government agencies. RMSB forms are also useful for money transmitters and other types of money services businesses in establishing and maintaining banking relationships. Banking organizations, in keeping with their responsibilities under the Bank Secrecy Act, normally request registration information from money transmitters and other types of money services business I . d . 7 customers t lHt are requIre to regIster. At all relevant times, Ballic conducted business as an independent money transmitter, and had knowledge of Bank Secrecy Act registration requirements. Baltic provides money transfer services in any amount to and from Latvi a. In a typica l transaction, the c ustomer would complete a , 3 1 C.F.R. § IOJ.56(b)(8) . . < 3 1 U.S.C. § 5330 and 3 t C.F.R. * 103.4 t. 6 See Amend ment to Ihe Bank Secrecy Act Regulations-Definitions Relating to, and Registration of, MOllcy Services Businesses. 64 FR 45438 (August 20, 1999). 1 A money services business should re tain a copy of RMSB fOfms it submitted to the Fin[lncial Crimes Enforcement Network, as part of its records, for five years. Determinative evidence of a money services business' registration is nn ack llowledgcmclllletter sent by the rnlernal Revenue Service-Enterprise Computing Center-Detroit lIpon receipt, nnd nppropriate processing, of n RMSB form. The Finnncini Crimes Enforcement Network's website, www.fincen.gov, contains a "MSB Registration List," identifying money services businesses that are currcntly registercd. The MSB Registrntioll List is updated 1110nthl y, nnd provided i.lS n gencral referencc for the public. 2

form~ provided by Baltic, and provide Baltic with cash, check or money ordcr payable to Baltic in U.S. dollars for the amount of the transaction and applicable service fees. The Form would typically contain the names, addresses, and telephone numbers for the customer and bene ficiary to the transaction including an alternate contact person's name and phone number in the event the bencficiary could not be reached as well as an indication if physical delivery by a Baltic agent in Latvia would be required. Baltic would deposit the cash, checks or money orders provided by the customer in its financial institution account. Once the funds cleared and became available, Baltic would instruct the financial institution to wire transfer the funds to a designated financial institution in Latvia. Baltic's agent would retrieve the funds from the designated financial institution and make the funds physically available to the beneficiary. The funds would be provided in U.S. dollars or a designated currency. The Baltic agent would check identification and obtain the beneficiary's signature in processing the disbursement of funds to the beneficiary. Baltic would also provide the above described process in reverse order to accommodate customer transactions originating in Latvia with beneficiaries in the United States. Baltic filed RMSB forms with the Financial Crimes Enforcement Network in 200 I and 2003. Afte rwards, however, Baltic repeatedly failed to comply with biennial renewal requirements in a timely manner, despite notifications that it was not in compliance with Bank Secrecy Act registration requirements for money transmitters 9 In fact, for a majority of the time between January 2005 and September 20 I 0 Baltic conducted business as an unregistered money transmitter, in violation of the Bank Secrecy Act. IV. CfYIL MONEY PENALTY As administrator of the Bank Secrecy Act, the Financial Crimes Enforcemelll Network may impose civil money penalties against Baltic, or any person who owns or controls Baltic, for violations of money transmitter registration requirements. IO The Financial Crimes Enforcement Network may assess a civil money penalty for failure to register as a money services business, in an amount up to $5,000 per violation. Each day a violation continues constitutes a separate violation. The Financial Crimes Enforcement Network has determined that a civil money penalty is due for the violations o f the Bank Secrecy Act and its implementing regulations described in this ASSESSMENT. After considering the seriousness of the violations and the financial resources available to Baltic, the Financial Crimes Enforcement Network has determined that the appropriate penalty in this matter is $12,000. This civil money penalty shall be satisfied by four $3,000 payments to the United States Department of the Treasury. V. CONSENT TO ASSESSMENT To resolve this matter, and only for that purpose, Baltic, without admitting or denying either the facts or determinations described in Sections TIl and IV above, except as to jurisdiction in Section II wh ich is admitted, consents to the assessment of a civil money penalty in the sum of $ 12,000, which shall be satisfied by four $3,000 payments to the United States Department of the Treasury. Baltic shall pay the first $3,000 installment within five business days of the date of this 'The forlll is called by Bailie Ihe "Agreellleni for Ihe Trnnsfer of Funds." 9 Bahie tiled renewals during 2006 and 20 I 0, inSicad of renewi ng in 2005, 2007, and 2009 as required by Ihe regislralion regulalion and inslruelions 10 Ihe RMSB forlll. See 3 1 C.F.R. § 103.41 (b)(2). 10 Sel' 31 U.S.c. § 5330(e) and 31 C.F.R. § 103.41 (e). 3

ASSESSMENT, and the second, third and foul'lh $3,000 installments within ninety (90), one hundred and eighty (180), and two hundred and seventy (270) calendar days respecti vel y. Baltic recognizes and states that it enters into the CONSENT freely and voluntarily and that no offers, promises, or inducements of any nature whatsoever have been made by the Financial Crimes Enforcemcnt Network or any cmployee, agent, or representative of the Financial Crimes Enforcement Network to induce Baltic to enter into the CONSENT, except for those specified in the CONSENT. Baltic understands and agrees that the CONSENT embodies the entire agreement between the Money Services Business and the Financial Crimes Enforcement Network relating to this enforcement matter only, as described in Section III above. Baltic further understands and agrees that there are no express or implied promises, representations, or agreements between the Money Services Business and the Financial Crimes Enforcement Network other than those expressly set fol'lh or referred to in this document and that nothing in the CONSENT or in this ASSESSMENT is binding on any other agency of government, whether Federal, State, or local. VI. RELEASE Baltic understands that execution of the CONSENT, and compliance with the terms of this ASSESSMENT and the CONSENT, constitute a complete settlement and release of the Money Services Business' civil liability for violations of the Bank Secrecy Act and regulations issued pursuant to that Act as described in the CONSENT and this ASSESSMENT against Baltic. By: jsl ------~ ----------- ---------------- James H. Freis, Jr., Director FINANCIAL CRIMES ENFORCEMENT NETWORK United States Depal'lment of the Treasury Date: 4