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FDIC Enforcement Decisions and Orders

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   [11,942] In the Matter of First Bank of Lincoln, Lincoln, Montana, Docket No. 02-029b (6-12-02).

   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. (This order was terminated by order of the FDIC dated 9-24-02; see ¶16,318.)

   [.1] Bank Secrecy Act—Compliance

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

   [.3] Bank Secrecy Act—Compliance Program—Employee Training

   [.4] Bank Secrecy Act—Compliance Officer Required

   [.5] Board of Directors—Program to Review Compliance with Consent Order Required

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

In the Matter of
FIRST BANK OF LINCOLN
LINCOLN, MONTANA
(Insured State Nonmember Bank)
CONSENT ORDER

FDIC-02-029b

   First Bank of Lincoln, Lincoln, Montana, ("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 regulations 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 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 A CONSENT ORDER ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated May 13, 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 a CONSENT ORDER ("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 regulations. 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 regulations:

       (a) operating in violation of section 326.8(c)(2) and section 326.8(c)(4) of the Rules and Regulations of the Federal Deposit Insurance Corporation, 12 C.F.R. §§ 326.8(c)(2) and (4), as more fully described on pages 7 and 8 of the FDIC's Report of Examination dated January 7, 2002; and

       (b) operating in violation of section 103.22(d)(4) of the Rules and Regulations of the Department of Treasury, 31 C.F.R. §103.22(d)(4), as more fully described on pages 7 and 8 of the Report of Examination dated January 7, 2002.

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

   [.1]1. Within 30 days of the effective date of this ORDER, the Bank shall comply in all material respects with the Bank Secrecy Act and its rules and regulations. Such compliance
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   shall include, but is not limited to, taking the following measures:

       a. eliminating and/or correcting the violations cited on pages 7 and 8 of the FDIC's Report of Examination of the Bank dated January 7, 2002, and taking such steps to ensure future compliance with applicable laws and regulations;

       [.2]b. independently testing for compliance with the Bank Secrecy Act 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 and noted in official board minutes; and

       [.3]c. providing effective BSA training to management, key personnel and other appropriate bank personnel (including, but not limited to, tellers, customer service representatives, lending officers, branch managers and all other customer contact personnel), by a qualified independent consultant. Written reports should be provided, in accordance with Paragraph 4 of this ORDER, which verify the scope, nature and frequency of the Bank's BSA training efforts. The documentation should also describe, with specificity, the Bank's communication methods and/or systems utilized to enhance the knowledge of and to inform appropriate personnel of changes to and developments in BSA regulations. In addition, the report should address how management measures the success of the training program, how objectives of the training program are met and how oversight of the training is implemented amongst bank management and other bank employees that are involved in BSA compliance measures. Upon the receipt of a report from Bank, FDIC will review the same and notify Bank of additional information that it deems necessary.

   [.4]2. Within 30 days of the effective date of this Order, the Bank shall ensure that the BSA compliance program is managed by a qualified officer who shall have the responsibility and necessary authority to ensure compliance with the BSA and applicable rules and regulations.

   [.5]3. The Board of Directors shall monitor and confirm the completion of actions taken by management to comply with the terms of this ORDER. The Board of Directors shall certify in writing to the Regional Director when all of the above actions have been accomplished. All actions taken by the Board of Directors pursuant to this ORDER shall be duly noted in the minutes of its meetings.

   4. Within 30 days of the end of the calendar quarter following the effective date of this 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 ORDER and the results thereof. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director has released the Bank in writing from making further reports.

   [.6]5. Following the effective date of this ORDER, the Bank shall send to its shareholders a copy of this ORDER or a description of this 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 ORDER rather than a copy of it, the description shall fully describe this ORDER in all respects.

   This ORDER shall become effective ten (10) days from the date of 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,
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   terminated, suspended, or set aside by the FDIC.

   Pursuant to delegated authority.

   Dated at San Francisco, California, this 12th day of June, 2002.

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