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FDIC Enforcement Decisions and Orders

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   [11,910] In the Matter of Pacific Union Bank, Los Angeles, California, Docket No. 02-055b (4-4-02).

(This order was terminated by order of the FDIC dated 2-25-04; see ¶16,370.)

   A consent order was issued, based on findings by the FDIC that it had reason to believe that respondent had engaged in unsafe and unsound practices.

   [.1] Bank Secrecy Act—Compliance

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

   [.3] Bank Secrecy Act—Compliance Program—Independent Testing Required

   [.4] Bank Secrecy Act—Compliance Program—Written Plan Required

   [.5] Customer Due Diligence Program—Minimum Requirements

   [.6] Bank Secrecy Act—Compliance—Directors' Committee to Oversee

   [.7] Suspicious Activity Report—Implement Policy

   [.8] Board of Directors—Meetings—Recording of Actions Required

   [.9] Shareholders—Disclosure of Cease and Desist Order Required

In the Matter of
PACIFIC UNION BANK
LOS ANGELES, CALIFORNIA
(Insured State Nonmember Bank)
CONSENT ORDER

FDIC-02-055b

   Pacific Union Bank, Los Angeles, CA, ("Bank"), 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 regulation alleged to have been committed by the Bank and of its right to a hearing on the alleged charges under section 8(b)(1) of the Federal
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   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 ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated March 28, 2002, 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 regulation, the Bank consented to the issuance of an ORDER ("CONSENT ORDER") by the FDIC.

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

CONSENT ORDER

   IT IS HEREBY ORDERED, that the Bank, its 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 and unsound banking practices and violations of law and/or regulation:

       (a) operating in violation of sections 326 and 353 of the Rules and Regulations of the Federal Deposit Insurance Corporation, 12 C.F.R. §326, 12 C.F.R. §353, as more fully described on pages 28 through 38 of the FDIC's Report of Examination of the Bank as of September 4, 2001.

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

   [.1]1. Within 45 days of the effective date of this CONSENT ORDER, the Bank shall comply in all material respects with the Bank Secrecy Act its rules and regulations, and Part 353 of the FDIC's Rules and Regulations. In addition, the Bank shall take all necessary steps to ensure future compliance with all applicable laws and regulations.

   [.2]2. Within 45 days of the effective date of this CONSENT ORDER, the Bank shall correct all violations of law cited on pages 28 through 38 of the FDIC's Report of Examination of the Bank as of September 4, 2001.

   [.3]3. Within 45 days of the effective date of this CONSENT ORDER, the Bank shall provide for independent testing of compliance with the Bank Secrecy Act, Part 353 of the FDIC's Rules and Regulations, and 31 C.F.R. Part 103. The independent testing should be conducted on an annual basis in compliance with the procedures described in the FDIC's "Guidelines for Monitoring Bank Secrecy Act Compliance." The testing, at a minimum, should include the following:

       (i) a test of the Bank's internal procedures for monitoring BSA;

       (ii) a sampling of large currency transactions followed by a review of the Currency Transaction Reports filings;

       (iii) a test of the validity and reasonableness of the customer exemptions granted by the Bank;

       (iv) a test of the Bank's recordkeeping system for compliance with the BSA; and

       (v) documentation of the scope of the testing procedures performed and the findings of the testing. Written reports should be prepared which document the testing results and provide recommendations for improvement and shall be presented to the Bank's Board of Directors.

   [.4]4. (a) Within 45 days of the effective date of this CONSENT ORDER, the Bank shall develop, adopt and implement a written compliance program, as required by the applicable provisions of section 326.8 of the FDIC's Rules and Regulations, 12 C.F.R. 326.8, designed to, among other things, ensure and maintain compliance by the Bank with the BSA and the rules and regulations issued pursuant thereto. The program shall ensure that clear and comprehensive BSA compliance reports are provided to the board on a monthly basis. Such program and its implementation shall be in a manner acceptable to the Regional Director as determined at subsequent examinations and/or visitations of the Bank. At a minimum, the program shall:

       (i) Require the Bank to develop, adopt and implement a written plan designed to ensure compliance with all provisions of the BSA.

       (ii) Establish a system of internal controls to ensure compliance with the BSA and the rules and regulations issued pursuant thereto, including policies and procedures to detect and monitor all transactions to ensure that they are not being conducted for illegitimate purposes
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       and that there is full compliance with all applicable laws and regulations.

       (iii) Provide for independent testing of compliance with all applicable rules and regulations related to the BSA and the reporting of suspicious transactions required to be reported pursuant to Part 353 of the FDIC's Rules and Regulations, 12 C.F.R. Part 353, and ensure that compliance audits are performed at least annually, are fully documented, and are conducted with the appropriate segregation of duties. Compliance audits shall include all branches and written findings of each audit shall be presented to the Board.

       (iv) Ensure that the Bank's BSA compliance program is managed by a qualified officer who shall have responsibility for all BSA compliance and related matters, including, without limitation, (A) the identification of timely, accurate and complete reporting to law enforcement and supervisory authorities of unusual or suspicious activity or known or suspected criminal activity perpetrated against or involving the Bank, and (B) monitoring the Bank's compliance and ensuring that full and complete corrective active is taken with respect to previously identified violations and deficiencies.

       (v) Provide and document training by competent staff and/or independent contractors of all board members and all appropriate personnel, including, without limitation, tellers, customer service representatives, lending officers, private and personal banking offices and all other customer contact personnel, in all aspects of regulatory and internal policies and procedures related to the BSA, with a specific concentration on accurate recordkeeping, form completion and the detection and reporting of known and/or suspected criminal activity. Training shall be updated on a regular basis to ensure that all personnel are provided with the most current and up to date information.

   [.5]5. Within 150 days of the effective date of this CONSENT ORDER, the Bank shall develop, adopt and implement a written customer due diligence program. Such program and its implementation shall be in a manner acceptable to the Regional Director, Division of Supervision, San Francisco Region (Regional Director) as determined at subsequent examinations and/or visitations of the Bank. At a minimum, the customer due diligence program shall provide for the following:

   (a) A risk focused assessment of the customer base of the Bank to determine the appropriate level of enhanced due diligence necessary for those categories of customers that the Bank has reason to believe pose a heightened risk of illicit activities at or through the Bank.

   (b) For those customers whose transactions require enhanced due diligence, procedures to:

       (i) determine the appropriate documentation necessary to confirm the identity and business activities of the customer;

       (ii) understand the normal and expected transactions of the customer; and

       (iii) reasonably ensure the identification and timely, accurate and complete reporting of known or suspected criminal activity against or involving the Bank to law enforcement and supervisory authorities, as required by the suspicious activity reporting provisions of Part 353 of the FDIC's Rules and Regulations, 12 C.F.R. Part 353.

   6. Within 90 days of the effective date of this CONSENT ORDER, the Bank shall develop, adopt and implement a written due diligence program to monitor employee and directors accounts. Such program and its implementation shall be in a manner acceptable to the Regional Director as determined at subsequent examinations and/or visitations of the Bank. At a minimum, the program shall provide for the following:

   (a) A risk focused assessment of the employee and directors accounts of the Bank to:

       (i) identify the routine and usual nature of their banking activities; and

       (ii) determine the appropriate level of enhanced due diligence necessary for those employee or directors accounts that the Bank has determined have unusual activity.

       (iii) reasonably ensure the identification and timely, accurate and complete reporting of known or suspected criminal activity against or involving the Bank to law enforcement and supervisory authorities, as required by the suspicious activity reporting provisions of Part 353 of the
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       FDIC's Rules and Regulations, 12 C.F.R. Part 353.

   [.6]7. Within 45 days of the effective date of this CONSENT ORDER, the Board's audit committee shall oversee the Bank's compliance with BSA, and Part 353 of the FDIC's Rules and Regulations. The committee shall receive reports from the qualified officer appointed in paragraph 4(iv), regarding compliance with BSA, Part 353, at least monthly, and shall report to the Board at every meeting.

   [.7]8. Within 45 days of the effective date of this CONSENT ORDER, the Bank shall establish and implement policies and procedures to advise the Board of Significant Suspicious Activity Reports ("SAR"). At a minimum, the Board should be advised in detail of all SAR's involving employees, contractors, officers and members of the Board. The policies and procedures shall also include guidelines to determine what SAR's are significant.

   [.8]9. All actions taken by the Board of Directors pursuant to this CONSENT ORDER shall be duly noted in the minutes of its meetings.

   10. Within 30 days of the end of the calendar quarter following the effective date of this CONSENT ORDER, and within 30 days of the end of each calendar quarter thereafter, the Bank shall furnish written progress reports to the Regional Director detailing the form and manner of any actions taken to secure compliance with this CONSENT ORDER, the results thereof, and contemplated future actions necessary to comply. Such reports may be discontinued when the Regional Director has released the Bank in writing from making further reports.

   [.9]11. Following the effective date of this CONSENT ORDER, the Bank shall send to its shareholders a copy of this CONSENT ORDER or a description of this CONSENT ORDER in conjunction both with the Bank's next shareholders communication and with its notice and/or proxy statement preceding the Bank's next shareholder meeting. If the Bank sends its shareholders a description of this CONSENT ORDER rather than a copy of it, the description shall fully describe this CONSENT ORDER in all respects.

   This CONSENT ORDER shall become effective ten (10) days from the date of its issuance.

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

   Pursuant to delegated authority.

   Dated at San Francisco, California, this 4th day of April, 2002.

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