PIERRE, S.D. (KELO) — The total value of assets dropped last year for financial trusts that South Dakota regulates.
Meanwhile, all 115 public and private trusts are being told by state regulators to conduct a self-assessment, after one of them was recently punished by federal regulators.
The Financial Crimes Enforcement Network, a bureau of the U.S. Treasury, announced on April 26 a $1.5 million civil penalty against The Kingdom Trust Company.
Originally organized under South Dakota law in 2010 as MyRA Trust Company, the name changed to Kingdom Trust in 2011. While headquartered in Sioux Falls, most of the 80 employees work at an operation center in Murray, Kentucky.
Kingdom Trust acknowledged in a consent order that it “willfully failed to accurately and timely report suspicious transactions to FinCEN” from February 15, 2016, through March 15, 2021. The order specifically listed four customer accounts for:
- A Uruguayan money services business;
- A company that purported to provide tourism services and was organized in the Caribbean island of Nevis;
- A British Virgin Islands-organized entity that is purportedly a private mutual fund whose two directors are Argentine citizens; and
- A Panamanian holding company with a United Kingdom subsidiary.
The order also referred to two other Kingdom Trust customer accounts that were connected to securities fraud.
The order’s violations section noted, “Although Kingdom Trust’s size is relatively modest, it had an outsized impact on the U.S. financial system: Kingdom Trust processed at least $4 billion in payments for foreign customers during the Relevant Time Period.”
The South Dakota Division of Banking is now moving ahead with an order to all state-regulated trusts to conduct self-assessments. Division director Bret Afdahl told the state Banking Commission at a meeting last week that members of his staff would work with trusts who need assistance complying with the order.
KELOLAND News independently obtained a copy of the order Monday.
The commission’s chairman, Jeff Erickson of Sioux Falls, said FinCEN has many more sources of information than the state division. Erickson is vice chairman for American Bank & Trust and was listed as a manager of Standard Trust.
“We regulate these institutions. We don’t manage them,” Afdahl told commissioners.
The division is attached to the South Dakota Department of Labor and Regulation. Neither the division nor the department made more information available regarding the order. Contacted for comment, DLR deputy secretary Dawn Dovre said, “The Division will take additional steps to assess the status of other trust companies in light of this order.”
Afdahl presented the commission with a chart showing that total assets reported by South Dakota-chartered trust companies fell to $590.2 billion as calendar 2022 closed.
That was down from $607 billion reported for 2021. The decline was the first since a slight dip in 2008.
There were 35 trusts chartered in South Dakota that year. Now there are 115. Afdahl said the division has become “pickier” as the number increased. “We look at these very thoroughly,” he told the commission.