EagleBank, a community bank with operations in Maryland, Virginia, and the District of Columbia, and its parent entity, Eagle Bancorp Inc., entered into a non-prosecution agreement on Tuesday and agreed to pay $9.7 million to resolve the Justice Department’s investigation into violations of the Bank Secrecy Act.

“For more than a decade, EagleBank knowingly allowed favoured clients to operate a check kiting scheme, even as compliance personnel repeatedly tried to stop it. Financial institutions are the first line of defence against financial crimes and must be gatekeepers, not gateways, for criminal activity. As this resolution makes clear, when banks deliberately allow unlawful conduct to persist, the Criminal Division will ensure they are held accountable.

“It is simply unacceptable for financial institutions to permit fraud under their noses,” said U.S. Attorney Brian D. Miller for the Middle District of Pennsylvania. “Our office is determined to investigate corporate crimes and fight financial fraud. We thank our partners for working with us,” said assistant attorney general A. Tysen Duva of the Justice Department’s Criminal Division.

According to the non-prosecution agreement, EagleBank admits that between 2010 and 2021, it willfully failed to establish an anti-money laundering and counter-terrorism financing (AML/CFT) programme, in violation of the Bank Secrecy Act. 

In one instance, the bank admits it allowed two customers, a son and his father, to operate a check-kiting scheme for more than a decade through accounts at EagleBank. 

Check kiting is a form of fraud in which an account holder writes a check for an amount greater than the amount available in the account and deposits that check into an account at a different bank, with the intent that the second bank will credit the funds to the second account before discovering the check was not supported by sufficient funds. 

In this case, the father was a friend and business partner of EagleBank’s former chairman and CEO, who resigned in 2019. 

Over the course of the scheme, senior bank executives repeatedly overruled compliance officers’ efforts to close the accounts and end the illicit conduct.

EagleBank’s facilitation of this scheme resulted in a loss of almost $6.3 million to another financial institution. 

Under the terms of the non-prosecution agreement, EagleBank agreed to pay the United States a fine of $9,057,821.62 and forfeiture of $736,515. The forfeiture amount consists of EagleBank’s proceeds from overdraft fees on the accounts involved in the check kiting scheme. 

EagleBank has further agreed to take additional remedial measures to strengthen its AML/CFT programme, to cooperate with the department’s investigation, and to report any violations of federal criminal law to the department.