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   [11,943] In the Matter of Saehan Bank, Los Angeles, California, Docket No. 02-100b (6-21-02).

   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 5-10-04; see ¶16,382.)

   [.1] Management—Qualifications Specified

   [.2] Board of Directors—Review Bank Affairs

   [.3] Capital—Maintain Tier 1 Capital

   [.4] Loan Loss Reserve—Establishment of or Increase Required

   [.5] Assets—Charge-off or Collection

   [.6] Assets—Total Assets, Limitations Imposed on Increase of

   [.7] Business Plan—Preparation Required

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

   [.9] Funds Management and Liquidity—Preparation or Revision of Funds Management Policy Required

   [.10] Dividends—Dividends Restricted

   [.11] Bank Operations—Internal Routine and Control Procedures—Written Plan Required

   [.12] Bank Secrecy Act—Compliance

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

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

   [.15] Customer Due Diligence Program—Minimum Requirements

   [.16] Due Diligence Program—Internal Monitoring—Program Required

   [.17] Bank Secrecy Act—Compliance—Board of Directors to Oversee

   [.18] Suspicious Activity Report—Policy Required

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

In the Matter of
SAEHAN BANK
LOS ANGELES, CALIFORNIA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

FDIC-02-100b

   Saehan Bank, Los Angeles, California ("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 AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated June 19, 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 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 Bank had engaged in unsafe or unsound banking practices and had committed violations of law and/or regulations. The FDIC,
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   therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED, that the Bank, 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 and unsound banking practices and violations:

       a. operating with inadequate management;

       b. operating with inadequate equity capital and reserves;

       c. operating with inadequate provisions for liquidity and funds management;

       d. operating with inadequate internal routine and controls policies;

       e. operating in such a manner as to produce low earnings;

       f. operating with a board of directors which has failed to provide adequate supervision over and direction to the active management of the Bank; and

       g. 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 24 through 41 of the FDIC's Report of Examination of the Bank as of December 31, 2001.

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

   [.1]1.(a) During the life of this ORDER, the Bank shall have and retain qualified management. Each member of management shall have qualifications and experience commensurate with his or her duties and responsibilities at the Bank. Each member of management shall be provided appropriate written authority from the Bank's board of directors to implement the provisions of this ORDER.

   (b) The qualifications of management shall be assessed on its ability to:

       (i) comply with the requirements of this ORDER;

       (ii) operate the Bank in a safe and sound manner;

       (iii) comply with applicable laws and regulations; and

       (iv) restore all aspects of the Bank to a safe and sound condition, including capital adequacy, earnings, management effectiveness, sensitivity to market risk, and liquidity.

   (c) During the life of this ORDER, the Bank shall notify the Regional Director of the FDIC's San Francisco Regional Office ("Regional Director") in writing when it proposes to add any individual to or replace any member of the Bank's board of directors; employ any individual as a senior executive officer; or change the responsibilities of any senior executive officer, so that the person would assume a different senior officer position. The notification must be received at least 30 days before such addition, replacement employment, or change in responsibilities is intended to become effective and should include a description of the background and experience of the individual or individuals involved.

   (d) The Bank may not add any individual to or replace a member of its board of directors, employ or change the responsibilities of any senior executive officer if the Regional Director issues a notice of disapproval pursuant to section 32 of the Act, 12 U.S.C. §1831i.

   [.2]2. The Board of Directors shall maintain a high level of participation in the affairs of the Bank and regular attendance at Board meetings. The Board shall assume full responsibility for the approval of sound policies and objectives for the Bank, and for the supervision of all of the Bank's activities, consistent with the role and expertise commonly expected for directors of banks of comparable size. The Board's participation shall include attendance at regular Board meetings to be held at least once a month. The Board at a minimum shall discuss, review, and approve at each meeting the following: reports of income and expenses; new, overdue, renewal, insider, charged-off, and recovered loans; investment activity; operating policies; and individual committee actions. Board minutes shall be kept for each meeting which accurately reflect the deliberations, discussions, review and approval of these items along with any other business discussed by the Board. Board minutes shall also reflect the names of all directors
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   agreeing or dissenting to any reviews, approvals or other actions taken by the Board.

   [.3]3.(a) From the effective date of this ORDER, the Bank shall have and maintain Tier 1 capital in such an amount as to equal or exceed eight (8.0) percent of the Bank's total assets.

   (b) The level of Tier 1 capital to be maintained during the life of this ORDER pursuant to Subparagraph 3(a) shall be in addition to a fully funded allowance for loan and lease losses, the adequacy of which shall be satisfactory to the Regional Director as determined at subsequent examinations and/or visitations.

   (c) Any increase in Tier 1 capital necessary to meet the requirements of Paragraph 3 of this ORDER may be accomplished by the following:

       (i) the sale of common stock; or

       (ii) the sale of noncumulative perpetual preferred stock; or

       (iii) the direct contribution of cash by the board of directors and/or shareholders of the Bank; or

       (iv) any other means acceptable to the Regional Director; or

       (v) any combination of the above means.

   Any increase in Tier 1 capital necessary to meet the requirements of Paragraph 3 of this ORDER may not be accomplished through a deduction from the Bank's allowance for loan and lease losses.

   (d) If all or part of the increase in Tier 1 capital required by Paragraph 3 of this ORDER is accomplished by the sale of new securities, the board of directors shall forthwith take all necessary steps to adopt and implement a plan for the sale of such additional securities, including the voting of any shares owned or proxies held or controlled by them in favor of the plan. Should the implementation of the plan involve a public distribution of the Bank's securities (including a distribution limited only to the Bank's existing shareholders), the Bank shall prepare offering materials fully describing the securities being offered, including an accurate description of the financial condition of the Bank and the circumstances giving rise to the offering, and any other material disclosures necessary to comply with the Federal securities laws. Prior to the implementation of the plan and, in any event, not less than fifteen (15) days prior to the dissemination of such materials, the plan and any materials used in the sale of the securities shall be submitted to the FDIC, Registration and Disclosure Section, 550 - 17th Street, N.W., Washington, D.C. 20429, for review. Any changes requested to be made in the plan or materials by the FDIC shall be made prior to their dissemination. If the increase in Tier 1 capital is provided by the sale of noncumulative perpetual preferred stock, then all terms and conditions of the issue, including but not limited to those terms and conditions relative to interest rate and convertibility factor, shall be presented to the Regional Director for prior approval.

   (e) In complying with the provisions of Paragraph 3 of this ORDER, the Bank shall provide to any subscriber and/or purchaser of the Bank's securities, a written notice of any planned or existing development or other changes which are materially different from the information reflected in any offering materials used in connection with the sale of Bank securities. The written notice required by this paragraph shall be furnished within ten (10) days from the date such material development or change was planned or occurred, whichever is earlier, and shall be furnished to every subscriber and/or purchaser of the Bank's securities who received or was tendered the information contained in the Bank's original offering materials.

   (f) For the purposes of this ORDER, the terms "Tier 1 capital" and "total assets" shall have the meanings ascribed to them in Part 325 of the FDIC Rules and Regulations, 12 C.F.R. §§ 325.2(t) and 325.2(v).

   [.4]4.(a) During the life of this ORDER, the Bank shall maintain an adequate reserve for loan and lease losses.

   (b) Additionally, during the life of this ORDER, the Bank shall fully implement policies for determining the adequacy of the loan and lease reserve. The policies shall provide for a review of the loan and lease reserve at least once each calendar quarter. Said review shall be completed at least ten (10) days prior to the end of each quarter, in order that the findings of the Board of Directors with respect to the loan and lease reserve may be properly reported in the quarterly Reports of Condition and Income. Any deficiencies in the loan and lease reserve shall be remedied in the calendar quarter
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   they are discovered, prior to submitting the Report of Condition and Income, by a charge to current operating earnings. The minutes of the Board of Directors meeting at which such review is undertaken shall indicate the results of the review. Upon completion of the review, the Bank shall increase and maintain the loan and lease reserve consistent with the established policies. Such policy and its implementation shall be satisfactory to the Regional Director as determined at subsequent examinations and/or visitations. Furthermore, the Bank shall not decrease the amount of the loan and lease reserve without the approval of the Regional Director.

   [.5]5. Within 45 days of the effective date of this ORDER, the Bank shall eliminate from its books, either though charge-off or collection all assets classified as "Loss" in the FDIC Report of Examination as of December 31, 2001. Reduction of these assets through proceeds of other loans made by the Bank is not considered collection for purposes of this paragraph.

   [.6]6. During the life of this ORDER, the Bank shall not increase its average assets by more than fifteen (15.0) percent per year (not compounded) measured from the FDIC's Report of Examination as of December 31, 2001. Average asset size of the Bank, for purposes of this paragraph, shall be determined on a quarterly basis, and contained in the written progress reports required in paragraph 19.

   [.7]7. Within 90 days from the effective date of this ORDER, the Bank shall formulate and fully implement a written business plan. This plan shall address, at a minimum, the following:

   (a) goals and strategies consistent with sound banking practices for improving and sustaining the earnings of the Bank, including:

       (i) an identification of the major areas in, and means by which, the board of directors will seek to improve the Bank's operating performance;

       (ii) an identification of the major areas in and means by which the Board will seek to improve the Bank's net interest margin, increase interest income, and reduce discretionary expenses;

       (iii) a realistic and comprehensive budget for all categories of income and expense;

       (iv) a budget review process to monitor the income and expenses of the Bank to compare actual figures with budgetary projections;

       (v) a description of the operating assumptions that form the basis for, and adequately support, major projected income and expense components;

   (b) coordination of the Bank's loan, investment, and operating policies, and budget and profit planning, with the funds management policy;

   (c) the need for additional capital, potential sources of capital, and an action plan for obtaining additional capital; and

   (d) methods for handling exposure to increasing contingent liabilities including the losses due to the activities detailed on page 3 of the FDIC Report of Examination as of December 31, 2001.

   The business plan, its implementation, and any revisions thereto, shall be in a form and manner acceptable to the Regional Director as determined at subsequent examinations and/or visitations.

   [.8]8. Within 45 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law and contraventions of policy which are set out on pages 20, 21, 24, 25, 27 through 32, and pages 39 through 41 of the Report of Examination of the Bank as of December 31, 2001. Within 90 days of the effective date of this ORDER, the Bank shall eliminate, and/or correct all violations of law and contraventions of policy which are set out on pages 22, 23, 26, and 33 through 38 of the Report of Examination of the Bank as of December 31, 2002. In addition, the Bank shall henceforth comply with all applicable laws, regulations, and policies.

   [.9]9. Within 60 days of the effective date of this ORDER, the Bank shall revise, adopt, and implement a written liquidity and funds management policy. Such policy shall include a strategy for reducing exposure to interest rate risk, and shall address the concerns contained in the FDIC Report of Examination dated December 31, 2001, at pages 13 through 17. The policy and its implementation shall be in a form and manner acceptable to the Regional Director as determined at subsequent examinations and/or visitations.

   [.10]10. The Bank shall not pay cash dividends without the prior written consent of the Regional Director.
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   [.11]11. Within 60 days of the effective date of this ORDER, the Bank shall formulate, adopt and implement a policy and procedures that adequately address the Bank's internal routine and controls. In addition the Board shall review and monitor compliance with the policy on a quarterly basis. the policy and its implementation shall be in a form and manner acceptable to the Regional Director, as determined at subsequent examinations and/or visitations.

   [.12]12. Within 45 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, and Part 353 of the FDIC's Rules and Regulations.

   [.13]13. Within 45 days of the effective date of this 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.

   [.14]14.(a) Within 45 days of the effective date of this 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 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 officers 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,
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       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.

   [.15]15. Within 45 days of the effective date of this 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, 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.

   [.16]16. Within 45 days of the effective date of this 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 FDIC's Rules and Regulations, 12 C.F.R. Part 353.

   [.17]17. Within 45 days of the effective date of this ORDER, the Board shall oversee the Bank's compliance with BSA, and Part 353 of the FDIC's Rules and Regulations. The Board shall receive reports from the qualified officer appointed in paragraph 14(a)(iv), regarding compliance with BSA and Part 353 at least monthly.

   [.18]18. Within 45 days of the effective date of this 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.

   19. Within 30 days of the end of the calendar quarter, commencing with the quarter ending September 30, 2002, 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, 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.

   [.19]20. Following the effective date of this ORDER, the Bank shall send to its shareholders a copy 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.
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   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, terminated, suspended, or set aside by the FDIC.

   Pursuant to delegated authority.

   Dated at San Francisco, California, this 21st day of June, 2002.

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