both sides of the border, and through the domestic funds transfer system of the beneficiary. foreign banks often operate in jurisdictions that do not impose the same economic sanctions on foreign customers as the united states. transactions involving these sanctioned customers are nonetheless subject to u. s. law if the transaction is routed through the u. s., as is typical for transactions conducted in u. s. dollars. foreign banks that operate in countries without sanctions similar to those imposed by the united states have not always had in place the mechanisms to ensure transactions routed through the u. s. comply with u. s. law. many of the federal reserve ’ s enforcement activities are directed at remedying these situations. one of the federal reserve ’ s most important sanctions enforcement cases involved abn amro. in response to corrective measures the federal reserve imposed on the firm ’ s new york branch in 2004, 2 which required the bank to review certain historical transactions, abn amro discovered numerous payment messages that were sent through its u. s. branch or a u. s. correspondent in a manner designed to circumvent the filters used by the u. s. institution to detect transactions involving sanctioned parties. in particular, the information that identified a u. s. sanctioned party was omitted from the swift payment sent through the u. s., while a complementary payment instruction with sanctioned party information was deliberately routed outside the united states. the federal reserve responded by escalating our enforcement action to a cease and desist order and imposing a substantial penalty on abn amro. 3 the federal reserve ’ s order required abn amro to implement a global compliance program and take specific steps to prevent circumvention of the required u. s. board of governors of the federal reserve system ( 2004 ), “ written agreement with abn amro bank, ” press release, july 26. board of governors of the federal reserve system ( 2005 ), “ agencies release bank supervisory and penalty actions against abn amro bank, n. v., ” press release, december 19. bis central bankers ’ speeches sanctions filters. we coordinated this action with other u. s. and foreign regulators, including the home country supervisor for abn amro. the federal reserve ’ s enforcement action against abn amro triggered important changes in cross - border payment practices. the federal reserve played a key role in this debate and in developing the standards that have since been adopted to improve transparency in crossbor

##a and u. s. sanctions area. collectively, these cases have focused attention on potential misuse of the financial system for financial crimes, strengthened compliance programs at banking organizations ( both in the u. s. and abroad ), and generated billions of dollars in fines paid to the u. s. treasury. our coordination efforts begin at an early stage in the supervisory process. for example, the federal reserve brings every instance of an anti - money laundering deficiency or violation to the attention of fincen so that fincen may consider assessing a penalty for violations of the bsa. we also notify ofac of any apparent, unreported sanctions violations discovered in the course of an examination, and direct the banking organization we supervise to provide information directly to ofac as required by regulation. in addition, we share information and coordinate with the department of justice, state law enforcement, the federal banking agencies, and state regulators, as appropriate, as part of our enforcement program. the enforcement process it has been our experience that the majority of institutions supervised by the federal reserve have well - administered and effective bsa and ofac compliance programs. nevertheless, there have been instances where concerns have been raised by our examiners. importantly, the federal reserve does not have authority from congress to conduct criminal investigations or to prosecute criminal cases. the decision to prosecute a financial institution for money laundering offenses and criminal violations of the bsa and u. s. sanctions laws is made by the department of justice. most of these problems are resolved promptly after they are brought to the attention of a bank ’ s management and directors. in some instances, problems are of more serious concern and use of the federal reserve ’ s enforcement authority is deemed appropriate. in these cases, an informal supervisory action may be taken, such as requiring an institution ’ s board of directors to adopt an appropriate resolution or executing a memorandum of understanding between an institution and a reserve bank. in the most serious cases, the federal reserve may take a formal enforcement action against an institution. these actions may include a written agreement, a cease and desist order, or a civil money penalty. congress has also given the federal reserve the authority to terminate the operations of certain entities operating in the u. s. upon the conviction of a money laundering offense by the department of justice, and to prohibit insiders who intentionally commit such offenses from participating in the banking industry. the type of enforcement action pursued by the federal reserve against an institution is directly related to the severity