(This order was terminated by order of the FDIC dated 6-23-04; see ¶16,388.)
[.1] Bank Secrecy ActCompliance
[.2] Currency TransactionsInternal Review Procedures
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[.3] Suspicious Activity ReportInternal Review Procedures
[.4] AuditAudit Committee, Establish
[.5] AuditReview of Policies Required
[.6] Board of DirectorsCompliance with Cease and Desist OrderWritten
Progress Reports Required
[.7] ShareholdersDisclosure of Cease and Desist Order Required
In the Matter of
FAMILY BANK AND TRUST CO.
PALOS HILLS, ILLINOIS
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST
FDIC-02-019b
OBRE No. 2002-BBTC-07
Family Bank and Trust Co., Palos Hills, Illinois ("Bank"),
having been advised of its right to a NOTICE OF CHARGES AND OF HEARING
("NOTICE") detailing the unsafe or unsound banking practices and
violations of law, rule or regulation alleged to have been committed by
the Bank, and of its right to a hearing on the charges under section
8(b) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C.
§1818(b), and under 38 Ill. Adm. Code, Section 392.30, regarding
hearings before the Office of Banks and Real Estate for the State of
Illinois ("OBRE"), and having waived those rights, entered into a
STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST
("STIPULATION") with representatives of the Federal Deposit
Insurance Corporation ("FDIC") and OBRE dated March 8, 2002,
whereby, solely for the purpose of this proceeding and without
admitting or denying the charges of unsafe and unsound banking
practices and violations of law, rule or regulation, the Bank consented
to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the
FDIC and OBRE.
The FDIC and OBRE considered the matter and determined that they
had reason to believe that the Bank had engaged in unsafe or unsound
banking practices and violations of law, rule or regulation. The FDIC
and OBRE, therefore, accepted the STIPULATION and the FDIC and OBRE
issued the following:
ORDER TO CEASE AND DESIST
IT IS HEREBY ORDERED, that the Bank, its institution-affiliated
parties, as that term is defined in section 3(u) of the FDI 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
of law, rule or regulation:
A. Operating the Bank without effective supervision by the board of
directors and executive management to prevent unsafe or unsound
practices and violations of law and regulations related to the Currency
Reporting act, 205 ILCS 685/1 et seq., the Bank Secrecy Act,
31 U.S.C. §§ 5311-5330, and regulations implementing the Bank
Secrecy Act, including 12 C.F.R. Part 326, Subpart B, and 31 C.F.R.
Part 103 (hereinafter collectively, "Bank Secrecy Act") and Part
353 of the FDIC Rules and Regulations, 12 C.F.R. Part 353 (Part
353");
B. Failing to ensure accurate and timely filing of Suspicious Activity
Reports ("SARs") pursuant to Section 353.3(a) of FDIC's Rules
and Regulations, 12 C.F.R. §353.3(a);
C. Failing to file Currency Transaction Reports ("CTRs") as
required under 31 C.F.R. §103.22 for transactions that are
structured, as defined by 31 C.F.R. §103.11(gg);
D. Operating the Bank with an ineffective system of internal controls
to ensure ongoing compliance with the Bank Secrecy Act and Part 353;
E. Operating the Bank with an ineffective system of independent testing
for compliance with the Bank Secrecy Act and Part 353;
F. Operating the Bank with an ineffective training program for
appropriate Bank personnel to ensure compliance with the Bank Secrecy
Act and Part 353;
G. Failing to implement effective coordinating and monitoring
procedures by a single, designated, responsible individual to ensure
compliance with the Bank Secrecy Act and Part 353; and
H. Failing to implement an effective "Know Your Customer" policy
and procedure
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to ensure compliance with the Bank Secrecy Act and Part
353.
IT IS FURTHER ORDERED that the Bank, its institution-affiliated
parties, and its successors and assigns take affirmative action as
follows:
[.1]1. (a) Within 60 days from the effective date of this ORDER, the Bank
shall adopt all necessary policies and procedures to ensure the Bank's
future compliance with the Bank Secrecy Act and Part 353. At a minimum,
such policies and procedures shall include the provisions set out in
subparagraphs (b) and (c), below.
(b) Within 30 days from the effective date of this ORDER, the Bank
shall:
(i) establish revised procedures for implementing all aspects of
its Know Your Customer policy; and
(ii) establish revised procedures for identifying and verifying the
type and dollar volume of transactions that the Bank anticipates will
occur during a monthly period for each deposit account that is expected
to have $5,000 or more in monthly aggregate cash and/or wire transfer
activity.
(c) Within 60 days from the effective date of this ORDER, the Bank
shall develop and implement policies and procedures to identify,
verify, monitor and determine the legitimacy of transactions for each
deposit account that is expected to have monthly cash and/or wire
transfer activity aggregating $5,000 or more. The policies and
procedures shall require a regular periodic comparison of actual
activity against expected or anticipated activity, including a
comparison of the type and dollar amount of actual activity against the
expected activity, for each account that was expected to have and each
account that had $5,000 or more in monthly aggregate cash and/or wire
transfer activity. The policies and procedures shall require this
periodic comparison to be conducted on each such account not less
frequently than quarterly. The Bank's policies and procedures shall
include procedures for identifying and documenting significant
variances between anticipated and actual activity and for reporting
variances to Bank management and to the audit committee to be
established pursuant to paragraph 3 of this ORDER and shall include
procedures for the filing of CTRs and/or SARs, when appropriate.
(d) The revised policies and procedures required by subparagraphs (a),
(b) and (c) shall be submitted to the Regional Director of the Chicago
Regional Office of the FDIC ("Regional Director") and the
Commissioner of OBRE ("Commissioner") for review and comment upon
completion. Within 30 days from the receipt of any comments from the
Regional Director and Commissioner on the policies and procedures
required by this paragraph, and after the adoption of any recommended
changes, the board of directors shall approve the policies and
procedures, which approvals shall be recorded in the minutes of a board
of directors' meeting.
[.2][.3]2. (a) Within 30 days from the effective date of this ORDER, the Bank
shall establish and implement monitoring and reporting procedures
relating to the proper filing of CTRs and SARs, and ensure that all
appropriate bank employees are aware of the procedures and their
responsibilities in implementing the procedures; and
(b) Within 60 days from the receipt by the Bank of the CTR log, the
Bank shall review each CTR and SAR filed by the Bank in the years 1998
through 2001 for inaccuracies, incompleteness and/or a failure to file
CTRs and SARs. After such review is completed, the Bank shall contact
the Financial Crimes Enforcement Network of the Department of the
Treasury regarding the refiling of inaccurate and/or incomplete CTRs
and SARs, and shall provide requested written material to complete the
file information on any inaccurate or incomplete CTR and SAR. In
addition, the Bank shall file any additional CTR and SAR deemed
necessary from the review. Documentation supporting the determination
shall be retained in the Bank's records. If the Bank determines a CTR
and/or SAR shall be filed, it shall follow its procedures with respect
to the filing and retention of documentation. Upon the completion of
its review, the Bank shall submit the findings of its review to the
Regional Director and Commissioner.
[.4]3. (a) Within 30 days from the effective date of this ORDER, the Bank
shall establish an audit committee comprised of at least 3 directors
who are not officers of the Bank. In addition to other duties which may
be assigned, the audit committee shall oversee the Bank's compliance
with the Bank
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Secrecy Act, Part 353, and the Bank's Know Your Customer
policies and procedures.
[.5] (b) Within 30 days from the effective date of this ORDER, the Bank
shall amend its audit policies, procedures, and practices, both with
regard to internal audits and with regard to external audits, to
provide that audit findings are submitted directly to the audit
committee for review and to provide that the Bank's Know Your Customer
policies and procedures become subject to review as part of the Bank's
routine auditing. The audit committee shall receive from Bank
management monthly reports regarding the Bank's compliance with the
Bank Secrecy Act, Part 353, and the Bank's Know Your Customer policies
and procedures. The audit committee shall present a report regarding
the Bank's compliance with the Bank Secrecy Act, Part 353, and the
Bank's Know Your Customer policies and procedures to the Bank's board
of directors at each regularly scheduled meeting of the Bank's board
of directors. Such report shall be recorded in the minutes of the
Bank's board of directors and retained in the Bank's records.
[.6] 4. Within 75 days from the effective date of this ORDER and,
thereafter, within 30 days of the end of each calendar quarter, the
Bank shall furnish to the Regional Director and Commissioner written
progress reports signed by each member of the Bank's board of
directors, detailing the actions taken to secure compliance with the
ORDER and the results thereof. Such reports may be discontinued when
the corrections required by this ORDER have been accomplished and the
Regional Director and Commissioner have, in writing, released the Bank
from making further reports.
[.7] 5. Within 60 days from the effective date of this ORDER, the Bank shall
send to its shareholders a description of this ORDER. The description
shall fully describe this ORDER in all material respects. The
description and any accompanying communication, statement or notice
shall be sent to the FDIC, Registration and Disclosure Section, 550
17th Street, N.W., Washington, D.C. 20429 and to Scott D. Clarke,
Assistant Commissioner, Office of Banks and Real Estate, 500 East
Monroe, Springfield, Illinois 62701, for review at least 20 days prior
to dissemination to shareholders. Any changes requested to be made by
the FDIC or OBRE shall be made prior to dissemination of the
description, communication, notice or statement.
This ORDER shall be effective 10 calendar days after its issuance by
the FDIC and OBRE.
The provisions of this ORDER shall be binding upon the Bank, its
institution-affiliated parties, and any successors and assigns thereof.
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 and OBRE.
Pursuant to delegated authority.
Dated: March 12, 2002.