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FDIC Enforcement Decisions and Orders

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   [11,854] In the Matter of Commercial Bank of New York, New York, New York, Docket No. 01-157b (10-11-01).

   A cease and desist order was issued, based on findings by the FDIC that it had reason to believe that respondent had engaged in unsafe and unsound practices. (This order was terminated by order of the FDIC dated 12-11-01; see ¶16,295.)

   [.1] Bank Secrecy Act—Compliance

   [.2] Violations of Law—Correction of Violations Required

   [.3] Bank Secrecy Act—Compliance Program—Minimum Requirements

In the Matter of
COMMERCIAL BANK OF
NEW YORK

NEW YORK, NEW YORK
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

FDIC-01-157-b

   Commercial Bank of New York, New York City, New York ("Insured Institution"), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices and violations of law and/or regulations alleged to have been committed by the Insured Institution and of its right to a hearing on the alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b)(1), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated October 8, 2001,
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   whereby solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices and violations of law and/or regulations, the Insured Institution consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC.

   The FDIC considered the matter and determined that it had reason to believe that the Insured Institution had engaged in unsafe or unsound banking practices and had committed violations of law and/or regulations. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED that the Insured Institution, its directors, officers, employees, agents, and other institution-affiliated parties (as that term is defined in Section 3(u) of the Act, 12 U.S.C. §1813(u)), and its successors and assigns cease and desist from the following unsafe or unsound banking practices and violations:

   (a) engaging in unsafe and unsound practices and violations of applicable Federal laws and regulations including the Bank Secrecy Act, 31 U.S.C. §§ 5311–5330, and 31 C.F.R. Part 103 (hereinafter "BSA"), section 326.8 of the FDIC Rules and Regulations, 12 C.F.R. §326.8, Part 353 of the FDIC Rules and Regulations, 12 C.F.R. Part 353, and Part 300 of the Superintendent's Regulations, 3 NYCRR Part 300 ("Part 300"), as more fully described on pages 5 through 10 of the joint Report of Examination of the Insured Instution by the FDIC and the New York State Banking Department as of March 31, 2000 ("ROE"), including failure to:

       (1) Maintain adequate policies and procedures designed to ensure proper screening of new accounts in the private banking area;

       (2) Know its customers and document such knowledge with records that establish the customer's identity, source of wealth, net worth expected or anticipated level of account activity, and memorialize the substance of contacts with customers;

       (3) Design and maintain processes and procedures that would be reasonably likely to detect suspicious customer activities and provide for the reporting of such activities to the appropriate authorities, pursuant to 12 C.F.R. Part 353;

       (4) Periodically review customer account activity with account managers, and establish levels of expected activity, in order to be able to assess whether particular transactions are of a consistent nature and within expected levels;

       (5) Provide comprehensive and effective know your customer and suspicious activity training to all appropriate personnel; and

       (6) Adopt and implement written policies and procedures necessary to adequately screen, monitor and verify wire transfers and other account transactions to assure compliance with the U.S. Department of Treasury's Office of Foreign Assets Control ("OFAC") 31 C.F.R. Part 500 et seq., as well as any rules and guidelines issued or administered by OFAC.

   IT IS FURTHER ORDERED that the Insured Institution, its institution-affiliated parties, and its successors and assigns, take affirmative action as follows:

   [.1] (1) The Insured Institution shall comply in all material respects with BSA, Part 353 and section 326.8 of the FDIC Rules and Regulations, 12 C.F.R. Part 353, §326.8, and Part 300.

   [.2] (2) Eliminate and/or correct the violations of BSA, Part 353 and section 326.8 of the FDIC Rules and Regulations, 12 C.F.R. Part 353, §326.8, and Part 300, as cited in the ROE;

   [.3] (3) Within 45 days of the date of this ORDER, submit to the Regional Director an acceptable written Enhanced Compliance Program designed to monitor compliance with recordkeeping and reporting requirements of BSA. The program will require (1) the collection and verification, prior to account opening, of documentation that establishes account holder identity, source of wealth, net worth, and type and expected levels of account activity, and (2) the institution of policies and procedures that will substantially increase the likelihood that suspicious activities will be detected, recorded, tracked and reported to the appropriate authorities, as required by law and regulations. At a minimum, the Enhanced Compliance Program shall include:

       (A) An effective internal compliance program and system of internal controls pursuant to section 326.8 of the FDIC Rules and Regulations, 12 C.F.R. §236.8;

       (B) Independent testing for compliance with BSA pursuant to section 326.8 of the
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       FDIC Rules and Regulations, 12 C.F.R. §326.8, using qualified, trained, and experienced Insured Institution personnel or outside party;

       (C) Designation of a qualified individual or individuals responsible for coordinating and monitoring day-to-day compliance with BSA pursuant to section 326.8 of the FDIC Rules and Regulations, 12 C.F.R. §326.8;

       (D) Comprehensive and effective training for appropriate personnel pursuant to section 326.8 of the FDIC Rules and Regulations, 12 C.F.R. §326.8. Such training shall be conducted by competent and qualified personnel, knowledgeable in all aspects of the relevant laws, regulations, and internal policies and procedures;

       (E) Based on a risk-focused review of customers, an update and enhancement of policies and procedures relating to the verification of identification of account holders and the monitoring of account transactions. The extent of account monitoring will be based on the results of the risk review;

       (F) Development and implementation of a procedure relating to suspicious or unusual activity to ensure (1) that potential suspicious or unusual activities, including but not limited to, currency and wire transactions, are properly identified and reported pursuant to state and federal regulations, and (2) that all activities of a suspicious nature are properly logged, followed up, reviewed, and investigated;

       (G) Adoption of written policies and procedures relating to the verification and screening of accounts, wire transfers and other account activity to ensure compliance with OFAC, 31 C.F.R. Part 500 et seq., as well as any rules and guidelines issued or administered by OFAC.

   4. The programs, plans and procedures required in this ORDER shall be submitted to the Regional Director for review and approval. Acceptable programs, plans, and procedures shall be submitted within the time periods set forth in this ORDER. The Board of Directors shall adopt the approved programs, plans, and procedures within 10 days of approval noting such approval in the minutes and the Insured Institution shall fully comply with them. During the term of this ORDER, the approved programs, plans, and procedures shall not be amended or rescinded without the prior written approval of the Regional Director.

   5. Within fifteen (15) days after the end of each quarter following the date of this ORDER the Insured Institution shall submit a written progress report to the Regional Director detailing actions taken to secure compliance with this ORDER and the results of those actions. The Regional Director may, in writing, discontinue the requirement for progress reports or modify the reporting schedule.

   The provisions of this ORDER shall be binding upon the Insured Institution, its directors, officers, employees, agents, successors, assigns, and other institution-affiliated parties of the Insured Institution.

   This ORDER shall be effective immediately upon its issuance.

   The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provisions of this ORDER shall have been modified, terminated, suspended, or set aside by the FDIC.

   Pursuant to delegated authority.

   Dated: October 11, 2001

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