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SD-HQ’ed Kingdom Trust Failed to Vet Customers, Helped Drug Dealers Launder Money

During the 2022 Session, to deflect calls for action to prevent corrupt financial dealings in South Dakota’s trust industry, Republican legislators expressed supreme confidence in the reliability of South Dakota’s trust companies to vet their customers:

Senate Majority Leader Gary Cammack (R-Union Center) told reporters in a news conference Thursday some lawmakers heard a presentation from people in South Dakota’s trust industry.

“I have all the confidence in the world that that sorta thing isn’t happening in South Dakota,” Cammack said. “The amount of vetting that they do to even accept a customer is absolutely amazing. They chase every rabbit down every trail.”

…“I don’t buy the report that was presented last fall,” House Majority Leader Kent Peterson (R-Salem) said. “The work that they do is done the right way” [Eric Mayer, “Republican Leadership Says No Trust Industry Bills Expected,” KELO-TV, 2022.02.10].

This week, the Financial Crimes Enforcement Network, a bureau of the United States Treasury, announced it is fining South Dakota-chartered Kingdom Trust Company $1.5 million for failing to vet its customers:

The Financial Crimes Enforcement Network has assessed a $1.5 million civil money penalty on South Dakota-chartered The Kingdom Trust Company (Kingdom Trust) for willful violations of the Bank Secrecy Act (BSA) and its implementing regulations. This is FinCEN’s first enforcement action against a trust company.

“Kingdom Trust had virtually no process to identify and report suspicious transactions, resulting in it processing over $4 billion in international wires with essentially no controls,” said FinCEN’s Acting Director Himamauli Das. “This enforcement action is an important statement that we will not tolerate trust companies with weak compliance programs that fail to identify and report suspicious activities, particularly with respect to high-risk customers whose businesses pose an elevated risk of money laundering.”

Kingdom Trust admits that it willfully failed to accurately and timely report hundreds of transactions to FinCEN involving suspicious activity by its customers, including transactions with connections to a trade-based money laundering scheme and multiple securities fraud schemes that were the subject of both criminal and civil actions. These failures stemmed from Kingdom Trust’s severely underdeveloped process for identifying and reporting suspicious activity [Financial Crimes Enforcement Network, press release, 2023.04.26].

Kingdom Trust’s “severely underdeveloped” compliance process included failing to hire enough experienced financial experts to watch for money laundering and securities fraud:

Kingdom Trust’s process for identifying and reporting potentially suspicious activity during the Relevant Time Period was severely underdeveloped and ad hoc, resulting in Kingdom Trust’s willful failure to timely and accurately file SARs. Kingdom Trust personnel with AML [anti-money laundering] responsibilities have acknowledged not fully understanding federal SAR [suspicious activity report] filing requirements and that they may have missed important information about some of their riskiest clients as the result of maintaining other, non-AML responsibilities.

These deficiencies were exacerbated by Kingdom Trust’s failure, during the Relevant Time Period, to recruit sufficient personnel with experience in AML compliance, including SAR filing obligations, even after Kingdom Trust expanded into a new line of business offering services to customers that had elevated risks of money laundering. Kingdom Trust relied on a manual review of daily transactions by a single employee to identify potentially suspicious transactions and activity at various points throughout the Relevant Time Period….

The process used by Kingdom Trust to review transactions was substantially inadequate for the purpose of identifying suspicious activity. First, the daily reports reviewed by the Compliance Analyst did not provide any contextual information about the customer (e.g., source of funds) or the counterparty beyond originator or beneficiary name (e.g., their address, the Bank Identifier Code of the originating/beneficiary bank). Second, even if the reports had contained sufficient information, the manual nature of this process also made it difficult to detect suspicious activity given the transactional volume (generally in the thousands each day) when compared to the level of staffing. Finally, although Kingdom Trust’s AML training presentations included red flags, few of these red flags could have been identified based on a review of the daily transaction reports alone. For example, the red flags included: customer requests for anonymity, customer attempts to open an account without identification, and an account opened with a nominal balance that subsequently increased rapidly and significantly. It would not be reasonably possible for a Kingdom Trust employee to identify those red flags given the quantity of information contained in the daily transaction reports. The result is that Kingdom Trust willfully failed to timely and accurately report hundreds of suspicious transactions that flowed through Kingdom Trust into the U.S. financial system during the Relevant Time Period [FinCEN, Consent Order in the Matter of The Kingdom Trust Company, U.S. Treasury, 2023.04.26].

Among other harms, FinCEN’s failure to put eyes on shady transactions appears to have helped foreign customers move $4 billion unsupervised through the U.S. financial system including $63 million in drug money:

FinCEN said Kingdom Trust started working with international clients, “despite Kingdom Trust’s lack of experience in dealing with foreign securities firms” and its “lack of understanding why their clients were unable to establish custodial relationships with US-based securities firms.” Those clients included several in Latin America that FinCEN said had “elevated risks of money laundering.”

“Kingdom Trust’s decision to proceed with this new line of business allowed the transmission of at least $4 billion in payments for foreign entities through the United States with minimal oversight,” FinCEN said.

Of the suspicious transactions identified by FinCEN, over 400 were transactions processed in 2016 and 2017 for a customer accused of laundering bulk cash deliveries and wire transfers from illegal drug sales. A New York indictment alleges the cash was documented as payments for cellular phones and obscured the transfer of illicit proceeds totaling roughly $63 million.

FinCEN also said Kingdom Trust failed to identify accounts that perpetuated securities fraud with a value of around $9 million.

“Kingdom Trust’s failure in detecting and reporting suspicious activity for these transactions may have caused substantial harm to the U.S. financial system,” FinCEN added [Lee Strubinger, “Feds Lob $1.5 Million Penalty Against SD-Based Trust Company,” SDPB Radio, 2023.04.27].

Just reading the papers would have alerted Kingdom Trust to the shadiness of many of its customers:

…not only did much of the activity that Kingdom Trust failed to report bear hallmarks of suspicious transactions, several of Kingdom Trust’s customers and counterparties were the subject of media reports alleging their involvement in specified unlawful activities [FinCEN, Consent Order, 2023.04.26, p. 17].

In addition to paying the $1.5-million fine, Kingdom Trust must within 60 days hire a qualified independent consultant to review transactions from February 15, 2016, through March 15, 2021, involving the problematic customers and accounts revealed in this investigation. Kingdom Trust must file suspicious activity reports for all transactions flagged by the independent consultant. Kingdom Trust must also hire an independent consultant to review its anti-money laundering programs and make all reforms that consultant recommends. Kingdom Trust must admit that it willfully broke the Bank Secrecy Act and may not claim the civil penalty as basis for a tax deduction.

Perhaps Republicans will revisit their absolute confidence in South Dakota trust companies’ due diligence next Session.

22 Comments

  1. Nix 2023-04-29

    I have all of the confidence in the world that you
    better not believe our Hall of Famer, Drunk driver
    Gary(I weaseled out of it )Cammack.
    You might just wind up buying beautiful lake front
    property in Union Center with a private beach.
    Looks like a stock pond to me ……

  2. All Mammal 2023-04-29

    Didn’t Shoenfish or Shoenbeck or someone even say to question the vetting process is a smackable offense? Shady af. We are a hinderance to our very own nation. Shameful.
    Thank you for sharing this, Mr. H. It must get old always having to report on what a bunch of dunces our state leaders are. They are criminal thugs!

  3. John 2023-04-29

    South Dakota republicans? Investigate?
    maybe Williams and Ree are able to use your joke.

    One can rest assured that the South Dakota trust industry is a den of iniquity for billions of dollars.

  4. Arlo Blundt 2023-04-29

    We’re doing our best to see that the fentynal industry is given a “level playing field” to do it’s business. Feel free again in South Dakota.

  5. P. Aitch 2023-04-29

    Draconian Dakota caught “ridin’ dirty”? – FinCen is part of the division of the Treasury that deals with terrorism.

    If you live in South Dakota, you’re complacent in a government that looks the other way to international terrorism and international drug and weapons dealing.

    “Are you proud to be part of brushing this under the rug, Governor Noem?” Will a reporter ask her about this, please?

  6. Arlo Blundt 2023-04-29

    Mr. Aitch, the question need not be asked. Of course, she’s proud. South Dakota is open for business. We have a government that respects the investor class, the risk takers, hard working capitalists. It is not the South Dakota state government’s duty to be sitting in judgement regarding where the money for investment in our Trusts originates. We take the word of the Trusts that they do their due diligence. Why wouldn’t we? Let us not judge, lest we be judged…..or spanked.

  7. P. Aitch 2023-04-29

    You’re right, of course, Arlo. Thanks for pointing out the obvious. South Dakota is famous worldwide for being the place to launder and hide bloody, drug money with no questions asked.

  8. grudznick 2023-04-29

    People who have money need a place to put it. This is all just fine. Stop being so jealous of these fellows, they’re not hurting you. Go back to being mad at your neighbor who has the fancy and expensive loud pickup truck you don’t have, and the other neighbor with the much nicer lawn and hedges. But stay off his lawn!

  9. Mark Anderson 2023-04-29

    If you want South Dakota to grow like Florida write a new law about homes. If you have financial trouble you can buy a Florida mansion. It can’t be touched in any financial court case by any creditor. Your primary residence, you can plant Shady ladies, they grow well here.This has been true long before DeSantis World. No judgment collection on your home it’s in our constitution. It attracts the best. Dirty money, dirty homes. You could take over the midwest like Florida has the south.

  10. All Mammal 2023-04-29

    I got me a jacked, loud pickup that I just love bumping filthy rap music in. I normally keep it PG in residential areas, but I know just the place to creep by real slow some Sunday evening, real extra. Unless you despise northsiders so much you have already gotten the city to pass special noise ordinances in your neighborhood, Mr. G. But that would be hating on a player and players don’t hate; they congratulate, hey.
    Just joshin’. I’m not a dick and wouldn’t put my neighbors out like my crappy state elected officials who make my mom complacent in their criminal enterprise and wreak havoc on my country’s economics.
    But I will drive to the forgotten neighborhoods, get out and walk around to get people registered to vote, and possibly even run for office.

  11. Arlo Blundt 2023-04-29

    Grudznick–We all aspire to having a reliable income stream from our investments. Mrs. Noem supports that vision and is happy to have our state assist investors who have had the prudent insight to toil in the weapons trade, international terrorism, Fentenayl, and Bolivian Marching Powder industries, in search of a secure and reliable income for their sunset years. Our Trust Institutions, at least the Kingdom Trust, provides these investors with a worry free avenue to financial security. Mrs. Noem and our Legislators respect Kingdom Trust’s, and its investors from around the globe, God Given Right to Confidentiality in the hope that they will recognize our public Stewardship by donating just a small percentage of their profits to the Republican Campaign of their choosing.

    I do not envy these people. They may all end up doing time in the Crow Bar Hotel.

  12. P. Aitch 2023-04-29

    grudznichts. R U OK?

  13. larry kurtz 2023-04-29

    Like wipin’ yer assets with a hula hoop: it’s endless.

  14. Richard Schriever 2023-04-30

    Republican controlled SD state gooberment has virtually no process to identify and report suspicious transactions being performed by the 1,000’s of trusts “in” SD. All but ONE of Kingdom Trust’s employees lives in Western Kentucky. The one employee living in SD only claims residency here (Where might his/her RV be parked today?) to enable the trust to operate under SD’s non-existent rules and regulations.

  15. bruce 2023-04-30

    Once again the people are duped into the underhanded actions of THE FAITH DRIVEN INVESTOR Matt Jennings. Why should anyone be surprised in another right wing Christianist con artist preying on the “faithful” who are on the knees trying to get out of debt?

  16. Mark B 2023-04-30

    Cory,
    You’ve got to work w Tom L on a Daily Beast hit on Noem.. the Drug Money angle is sent from heaven.. Meth, we’re on it. Fentanol, we Fund it! National Guard troops in Mexico looking for drugs, while lax trust laws in our own state fund the trade. Again, sent from heaven!

  17. leslie 2023-05-01

    …perhaps ol’ mitch McConnell ( R. Sen., KY ) can bring some assistance to Kristi’s burgeoning secret SD trust industry. Ol’ Sen Mike Rounds could too w/his vast regulatory experience under fraudulent EB5 which his GOED had management of.

    The local Murray, KY newspaper, home to President Jason Anderson, reports:

    The manual review process was handled by the company’s AML Compliance Officer from December 2018 to February 2020, and following that person’s departure in March 2020, these duties were transferred to a more junior employee, Kingdom Trust’s sole compliance analyst, for a period of approximately four months. “In both instances, the assigned employees had other responsibilities and no prior AML/BSA experience,” the order stated. “In July 2020, Kingdom Trust hired a Compliance Officer with AML experience.” https://www.murrayledger.com/news/kingdom-trust-fined-1-5m-by-federal-agency/article_aad0f502-e7a6-11ed-a9ae-df3fa5308cfd.html

    NO ANTI-MONEY LAUNDERING qualifications or experience! Damn! SD has a legislative secret trust sub-group specifically tasked annually to “review and replace” all the newest loopholes!!

    The compliance analyst would escalate potentially suspicious transactions to Kingdom Trust’s AML compliance officer to review in consultation with Kingdom Trust’s general counsel…,
    that would be Timothy M. Kuhman Esquire, listed as agent, officer, director or general counsel in KY and/or SD. If he complies with this consent order.

    Tim Kuhman is a Vice President & General Counsel at Kingdom Trust based in Murray, Kentucky. Adjunct Professor Cuyahoga County
    2008-2008; Attorney Kuhman & Associates 2003-2010; General Counsel Equity Trust 2003-2009; and Services Professional & Lawyer Jones Day 2000-2002

    You remember Jones Day!

    https://www.npr.org/2022/09/13/1122536384/trump-lawyers-jones-day-servants-of-the-damned-david-enrich

  18. leslie 2023-05-01

    KINGDOM TRU$T
    CEO Ryan Radloff 1105 State Route 121 North, Suite B, Murray, KY 42071
    President Jason House Anderson 1105 State Route 121 North, Suite B, Murray, KY 42071
    Treasurer Lisa Tabers 1105 State Route 121 North, Suite B, Murray, KY 42071
    Vice President Timothy Michael Kuhman 1105 State Route 121 North, Suite B, Murray, KY 42071
    Executive Charles “Bo” Ives 1105 State Route 121 North, Suite B, Murray, KY 42071

    Director Charles “Bo” Ives 1105 State Route 121 North, Suite B, Murray, KY 42071
    Director Matthew Jennings 1105 State Route 121 North, Suite B, Murray, KY 42071
    Director Charles E Baker 70 Highview Ln., Murray, KY 42071
    Director Jason House Anderson 172 Bayshore Drive, New Concord, KY 42076
    Director Timothy M Kuhman 3000 S. Louise Ave., Apt. 308, Sioux Falls, SD 57106

    KINGDOM OF $AUDI ARABIA (K$A)
    Unitary Islamic absolute monarchy
    • King Salman
    • Crown Prince and Prime Minister
    $alman Mohammed bin $alman (M$BB) murderer

    REPUBLICAN IDIOT$ IN PIERRE $D LEGI$LATURE (head rabbit hole chaser$)
    $enate Majority Leader Gary Cammack (R-Union Center)
    House Majority Leader Kent Peterson (R-Salem)

  19. leslie 2023-05-01

    Matt Jennings says about Kingdom Trust, which he and God formed:

    “get behind me and follow me into this crazy market that we went into that pretty much nobody in Murray, Kentucky, understands or knows about until they come in to work for us. We’re the only company in that type of industry here. So they all learn in-house, but they come in and they they will follow because they trust me.”

    “So Kingdom came about from my love of real estate, and I wanted to put it in my retirement account. I found that process very difficult….somebody needs to start a company to do this. So that was the original kind of idea behind Kingdom Trust. Once we started it, we had to become a regulated trust company, just like a bank. We’re chartered in South Dakota. We had to do all that to started and few years into it, I was not the CEO early on and I was just a founder and I think I was executive vice president or something…. in 2014 I got asked by my partners in the board to become the CEO, which was one of the hardest times in my life.”

    “we made the switch into crypto in 2015. We actually started cursing crypto. In 2016, we became the first regulated financial institution in America to custody bitcoin and crypto. Some people say we were the first regulated financial institution in the world.”

    “wealth means all my needs are met physically, emotionally, relationally, everything right, like all my needs are met and they’re met abundantly.”

    “for years I ran a faith driven company and I did not know a single other Faith Driven Entrepreneur other than myself and my two buddies. And I think that’s one reason that my journey seems so lonely at times.”

    https://www.faithdriveninvestor.org/podcast-inventory/episode-90-kingdom-trust-god-money-bitcoin-with-matt-jennings

    so…”I have all the confidence in the world….The amount of vetting that they do to even accept a customer is absolutely amazing. They chase every rabbit down every trail.”

    “The work that they do is done the right way”

    “Anybody that’s making some cheap political argument that has to do with trusts in South Dakota ought to be slapped or spanked…. Spanked would be more appropriate. It’s child behavior.” South Dakota Republican leadership

  20. Mark B 2023-05-01

    “Noem said she was not aware of any Russian assets in South Dakota’s trust industry and praised the industry’s strong vetting process for setting up trusts.

    “It’s all private information,” Noem said. “Our trust industry does have integrity and it has been proven to be an outstanding lawful system in the country.”

    https://www.keloland.com/keloland-com-original/noem-lawmakers-not-worried-about-any-russian-connections-to-south-dakotas-trust-industry/

    This is gold.. Jesus Trust from Mitch’s KY Launders drug money through Kristi’s SD laundering, uh ‘trust’ industry, at the same time Kristi sends National Guard to ‘stop drugs at border’ using TN billionaire money.

    White Southern billionaires love Jesus, especially when he helps them make more money.. but somehow Soros is the real problem.

    Hilarious if it wasnt so sad. Or Noem wasnt so slimy.. she cant be governor forever, can she?

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