Banking and Finance Law Daily Wrap Up, ENFORCEMENT ACTIONS—Fed, Texas take United Texas Bank to task over BSA/AML compliance, (Sep 5, 2024)

By Justin Marcus Smith, J.D.

Without admitting or denying any of the agencies’ charges, United Texas Bank has agreed to a consent order aimed at strengthening bank board governance, staffing, training, and other matters pertinent to anti-money laundering.

United Texas Bank (UTB) of Dallas, Texas has entered into an administrative consent order with the Board of Governors of the Federal Reserve System (Fed) and the Texas Department of Banking (collectively, the supervisors) aimed at correcting “significant deficiencies” pertinent to the Bank Secrecy Act (BSA) and anti-money laundering (AML) regulations. UTB did not admit or deny any charges of unsafe or unsound banking practices or violation of Texas law (In the Matter of United Texas Bank, Docket No. 24-021-B-SM; Department Order No. 2024-025 (Aug. 29, 2024)).

Examination. According to the consent order, the Federal Reserve Bank of Dallas and the Texas Department of Banking completed an examination of UTB as of May 22, 2023. That examination allegedly found “significant deficiencies” in UTB corporate governance and oversight by the UTB board of directors and senior management. The deficiencies pertained to BSA/AML, specifically:

• BSA, 31 U.S.C. § 5311 et seq.;

• rules and regulations issued thereunder by the U.S. Department of the Treasury, 31 C.F.R. Chapter X; and

• AML requirements of Fed Regulation H, 12 C.F.R. §§ 208.62 and 208.63 (collectively, the BSA/AML Requirements)

The supervisors said the alleged deficiencies resulted in a BSA/AML compliance program violation.

Actions taken. The consent order indicates that UTB had already begun to take measures to strengthen its BSA/AML compliance program and to lower related risk. Accordingly, UTB, the Fed, and the TDB mutually agreed to a consent order covering UTB board of directors oversight and various actions to be taken.

Board oversight. Within 90 days of the effective date of the order, UTB is to submit a plan acceptable to the supervisors aimed at strengthening UTB board of directors oversight in the following five areas:

• control over UTB BSA/AML compliance;

• senior management tracking and tackling of instances of noncompliance;

• proper BSA/AML staff expertise and “direct reporting access” to the UTB board;

• adequate staffing and other resources for BSA/AML compliance; and

• improvement of information pertinent to BSA/AML compliance.

Corporate governance. Within 60 days of the effective date of the order, UTB is to submit a corporate governance plan focusing on three areas:

• effective UTB board supervision of the bank;

• adequate staffing and senior management succession; and

• identification and escalation of issues to the UTB board.

BSA/AML program. Again within 60 days, UTB is to submit a revised written BSA/AML compliance program focusing on six areas:

• addressing the findings of a third-party report dated July 3, 2024;

• internal controls pertinent to BSA/AML;

• risk assessment of all UTB products and services, customer types, etc.;

• independent testing of BSA/AML compliance;

• maintenance of a qualified BSA/AML compliance officer with full autonomy; and

• policies and procedures to ensure effective staff training.

Customer diligence. Within 60 days, UTB is to submit a revised customer due diligence program focusing on five items:

• policies, procedures, and controls for complete and accurate customer information;

• remediation of any deficient due diligence;

• risk ratings by customer type, location, transaction types, transaction volumes;

• focused assessment of high-risk customer categories; and

• periodic review of customer and account information.

Suspicious activity reporting. Within 60 days, UTB is to submit a revised program to reasonably ensure timely, accurate, and complete reporting of suspicious activities. The revised program is to focus on six items:

• methods for establishing monitoring rules and processes, by UTB customer type;

• periodic review;

• enhanced monitoring and investigation criteria and procedures for timely detection;

• policies and procedures to match law enforcement priorities;

• measures to ensure alert dispositions are properly supported and documented; and

• controls to ensure periodic review and updating of transaction monitoring.

Other measures. In addition, UTB is to address Office of Foreign Assets Control Compliance with respect to assessing OFAC risks and ensuring proper staff training and to submit various progress reports pertinent to complying with the consent order.

Companies: United Texas Bank

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