EagleBank to Pay Over $9.7 Million for Bank Secrecy Act Violations

Community bank EagleBank and its parent company agreed to pay more than $9.7 million to settle a Justice Department probe into decade-long failures to maintain anti-money laundering controls and allowing a check-kiting scheme to continue.

EagleBank to Pay Over $9.7 Million for Bank Secrecy Act Violations

A community banking group headquartered in the Washington, D.C. metropolitan area has struck a deal with federal prosecutors to resolve accusations that it broke anti-money laundering laws for more than a decade. EagleBank, which runs branches across Maryland, Virginia, and the nation's capital, together with its holding firm Eagle Bancorp Inc., consented to a non-prosecution arrangement requiring payments exceeding $9.7 million.

According to documents released by the U.S. Department of Justice, the institution acknowledged that from 2010 through 2021 it consciously neglected to build a functioning program to detect and prevent illicit financial flows and terrorist funding. During those years, the lender let a pair of related account holders — a man and his adult child — run a fraudulent check scheme through EagleBank accounts without intervention.

The fraud worked by exploiting the float period between banks: one party would draft a payment instrument backed by too little money, deposit it elsewhere, and temporarily benefit from credited funds before the first institution discovered the shortfall. The participants allegedly repeated this pattern in a rotating fashion for roughly ten years.

Court papers reveal that the elder participant enjoyed a personal and professional relationship with the bank's then-top leader, who departed in 2019. Internal watchdogs at EagleBank repeatedly flagged the suspicious accounts and pushed to shut them down, but higher-ranking managers rejected those recommendations and allowed the misconduct to persist. Another bank ultimately absorbed close to $6.3 million in damages from the operation.

The financial settlement includes a penalty of just over $9 million paid to the United States, plus the surrender of roughly $736,500 — the sum EagleBank earned in overdraft charges tied to the fraudulent accounts. Beyond the cash payout, the bank must overhaul its compliance infrastructure, assist investigators, and promptly disclose any new evidence of federal crimes.

Prosecutors from the Justice Department's money-laundering section and the Middle District of Pennsylvania's federal prosecutor's office led the case.

Source: U.S. Department of Justice

Source: DOJ Justice News