U.S. Bank. Photo: 4kclips/Shutterstock.com

Federal regulators are now often looking past CEOs and general counsel and taking aim at compliance officers personally.

In the latest incident, the Financial Crimes Enforcement Network on March 4 assessed a $450,000 civil penalty against Michael LaFontaine, former chief operational risk officer at U.S. Bank in the Minneapolis area. It is believed to be the first time the regulator has personally penalized a bank compliance officer for his role in anti-money laundering failures.

The Department of Justice had already reached a deferred prosecution agreement with the bank's parent company, U.S. Bancorp, in a $613 million settlement in 2018. The agreement said U.S. Bank "willfully fail[ed] to have an adequate anti-money laundering program."

The banking regulator, however, decided to hold an individual accountable, and its investigation pointed to LaFontaine. Its statement said LaFontaine failed to prevent violations of anti-money laundering laws, even after being repeatedly warned about insufficiencies in the compliance program.

LaFontaine, a lawyer who did not return messages seeking comment, worked at the bank for 10 years, most of it in compliance. He is now co-founder and managing director of Redpoint Advisors, a corporate legal consulting firm in Minneapolis and Washington, D.C.

The regulator said LaFontaine was liable in three areas: failing to implement an adequate transaction monitoring system, failing to devote adequate resources to the compliance program, and failing to timely file thousands of suspicious activity reports.

The consent order was especially critical of LaFontaine repeatedly ignoring warnings by other compliance staff and by regulators that the monitoring system was not adequate because it was capping the number of alerts generated by suspicious transactions. The cap meant some suspicious transactions were never flagged, investigated or reported.

It also said he failed to respond to internal and regulator warnings about being understaffed.

Last month the New York City Bar Association issued a report on the growing number of enforcement actions against individual compliance officers and said the trend was concerning to in-house counsel.

Michael Volkov, of the Volkov Law Group, wrote about the trend in a blog Thursday. "The lesson for compliance officers who work in regulated industries is fairly straightforward—when faced with real compliance problems, compliance professionals have to document efforts to address the deficiencies," wrote Volkov, who could not immediately be reached for comment.

He continued, "If a compliance professional fails to act in the face of clear and communicated deficiencies, the compliance professional faces risks of civil enforcement by regulatory agencies."