Burke & Herbert Bank & Trust must develop a new top-to-bottom compliance program and hire people to run it under the terms of an order issued by the Federal Deposit Insurance Corporation.
“The Alexandria, Virginia-based bank agreed to do so in a 14-page order [pdf] released last week, just as copies of a two-page letter explaining the regulatory action were arriving in shareholders’ mailboxes,” the Washington Business Journal said Monday.
The FDIC order said the bank consented “without admitting or denying any charges of unsafe or unsound banking practices or violations of law or regulation.”
The order didn’t impose any financial penalties and wasn’t filed in court.
Burke & Herbert’s board has ’90 days to develop, adopt, and implement a written BSA [Bank Secrecy Act] Compliance Program, including policies and procedures, which fully meets all applicable requirements of section 326.8 of the FDIC’s Rules and Regulations, 12 C.F.R. § 326.8, address the deficiencies and recommendations contained in the Report of Examination dated as of September 23, 2013 (the “ROE”), and which is designed to, among other things, ensure and maintain full compliance with the BSA and the rules and regulations issued pursuant thereto.”
The Bank Secrecy Act, passed by Congress in 1970, requires banks to report cash transactions of $10,000 or more, among other things.
The FDIC order required the bank to improve its anti-money laundering procedures, increase due diligence on customers, beef up its internal controls, hire more specialists and designated managers, and provide more training to its employees about compliance with the Bank Secrecy Act, anti-money laundering, and trade sanctions.
“As required by the order, the bank has named its first-ever BSA officer. Amanda Pierson was hired in July after holding a similar post at WashingtonFirst since March 2012, according to her LinkedIn profile. She will report to Jennifer Schmidt, who was hired in June as chief compliance officer as the bank reshuffled some other duties and positions,” the Washington Business Journal said.
The FDIC put more responsibility for compliance directly on the board.
The order said . . .
. . . the Board shall increase its supervision and direction of the Bank related to BSA, assuming full responsibility for the approval of sound BSA policies and objectives and for the supervision of all the Bank’s BSA activities, consistent with the role and expertise commonly expected for directors of banks of comparable size. The supervision shall include holding meetings no less frequently than monthly, at which it shall review and approve, at a minimum, programs and practices pertaining to the Bank’s BSA compliance, along with respective committee minutes pertaining to these matters. The minutes of the Board’s meetings shall document these reviews and approvals, including the names of any dissenting directors.
The FDIC required the bank to give notice to its shareholders, with a description of the material terms of the order. The FDIC had final approval over the wording of the notice.
“Following a constructive process of negotiation with the FDIC, the bank has committed to take specific steps to strengthen and enhance its Bank Secrecy Act program,” the notice to shareholders from bank CEO Hunt Burke and president and COO Scott McSween said in the notice to shareholders.
“Whereas we already were engaged intently in such work, we felt it appropriate to agree to this action by the FDIC in order to remain focused on the future of the bank,” the notice said.
Burke and McSween told the Washington Business Journal that this was the first time the FDIC had taken such action against the 162-year-old bank.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.