EagleBank, a community bank operating in Maryland, Virginia and the District of Columbia, along with its parent company Eagle Bancorp Inc., has entered into a non-prosecution agreement and will pay more than $9.7 million to resolve a Justice Department investigation into violations of the Bank Secrecy Act, the department announced.
According to the agreement, EagleBank admitted that between 2010 and 2021 it willfully failed to establish an anti-money laundering and countering the financing of terrorism program, as required under the Bank Secrecy Act. Officials said the bank allowed two customers — a son and his father — to operate a check kiting scheme for more than a decade through EagleBank accounts, despite repeated attempts by compliance staff to shut it down.
Check kiting involves writing checks for amounts exceeding available funds and depositing them into accounts at another bank to obtain credit before the insufficient funds are discovered, exploiting delays in check processing, according to the Justice Department. Officials said the father in this case was a friend and business partner of EagleBank’s former chairman and CEO, who resigned in 2019, and that senior bank executives repeatedly overrode compliance personnel who tried to close the accounts and stop the conduct. The scheme caused a loss of nearly $6.3 million to another financial institution, prosecutors said.
“For more than a decade, EagleBank knowingly allowed favored clients to operate a check kiting scheme, even as compliance personnel repeatedly tried to stop it,” said Assistant Attorney General A. Tysen Duva of the Justice Department’s Criminal Division. He added that financial institutions must serve as “gatekeepers, not gateways” for criminal activity and that the Criminal Division would hold banks accountable when they deliberately allow unlawful conduct to persist.
“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, adding that his office is determined to investigate corporate crimes and fight financial fraud. FBI Criminal Division Assistant Director Heith Janke said EagleBank’s failure to stop major fraud “weakened the financial system and enabled criminal activity.”
Under the agreement, EagleBank will pay a fine of $9,057,821.62 and forfeit $736,515, representing proceeds from overdraft fees collected on the accounts involved in the check kiting scheme, according to the Justice Department. The bank also agreed to strengthen its anti-money laundering and countering the financing of terrorism program, cooperate with the department’s investigation and report any violations of federal criminal law to the Justice Department.
The FBI investigated the case, which is being prosecuted by Chief Michael P. Grady of the Bank Integrity Unit of the Criminal Division’s Money Laundering, Narcotics and Forfeiture Section and Assistant U.S. Attorney Ravi Romel Sharma for the Middle District of Pennsylvania.
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