[GRADE A1 — NYDFS Consent Order (regulatory enforcement action)]
The consent order attributes the following actions to AML OFFICER-2:
Initial response to AML-1: The consent order states AML-2 "initially noted that the same negative allegations against Epstein had been approved by EXECUTIVE-1" and attached the Approval Email.
Escalation email to EXECUTIVE-2: After AML-1 pushed back, the consent order states AML-2 escalated. In this email, AML-2 noted that "by 2011, 40 underage girls had come forward with testimony of Epstein sexually assaulting them" and "Epstein managed to settle at least 17 lawsuits out of court."
The misinterpretation: The consent order states AML-2 "purportedly misinterpreted the conditions" imposed by the ARRC. Specifically: the ARRC said monitor for "unusual and/or suspicious activity or... size that is unusually significant or novel in structure." AML-2 interpreted this "to mean transactions that were unusual, suspicious, or novel as compared to the prior history of transactions related to the Epstein relationship."
Monitoring instructions: The consent order states AML-2 "only instructed the relevant transaction monitoring team to verify, using internet searches, that any woman involved with transactions related to the Epstein relationship was at least 18 years old and to only flag transactions if they could not discern a rational reason for the transaction."
March 2017 result: The consent order cites a monitoring team member's response to an alert about payments to a Russian model and Russian publicity agent: "since this type of activity is normal for this client it is not deemed suspicious."
July 2017: The consent order states AML-2 "among others, spoke with ATTORNEY-1 and advised that (a) his patterns gave the appearance of structuring, (b) this pattern was unacceptable, and (c) he would be provided with additional information about CTR reporting requirements." AML-2 found ATTORNEY-1 "credible and permitted him to continue."
WHAT THIS SHOWS AND DOES NOT SHOW: The consent order documents that AML-2 was aware of 40 victims and 17 settlements when they wrote the escalation email, and then subsequently interpreted the ARRC conditions in a way that made them functionally unenforceable. The consent order uses the word "purportedly" before "misinterpreted" — this word choice is the regulator's, and it signals that the NYDFS found the misinterpretation claim less than fully credible. However, the consent order does not state that the misinterpretation was deliberate. Whether this was gross incompetence or calculated enabling is not resolved by the document. No individual charges were brought.