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New York State Banking Department Issues Cease and Desist Order Against Commercial Bank of New York


October 11, 2001

THE SUPERINTENDENT OF BANKS OF THE
STATE OF NEW YORK 

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In The Matter of
COMMERCIAL BANK OF NEW YORK
New York, New York
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Order to Cease and
Desist and Imposition of
Monetary Penalty
Issued Upon Consent

WHEREAS, in recognition of their common goals to ensure compliance with all applicable federal and state laws, rules and regulations by the Commercial Bank of New York, New York, NY ("CBNY"), a New York State-chartered bank, the deposits of which are insured by the Federal Deposit Insurance Corporation ("FDIC"), and to effectively manage the legal, reputational and compliance risk of CBNY, the New York State Banking Department (the "Department") and CBNY have mutually agreed to enter into this combined Order to Cease and Desist and Imposition of Monetary Penalty Issued Upon Consent (the "Order");

WHEREAS, during the course of a joint examination of CBNY, the Department and the FDIC determined that CBNY must take immediate action to correct certain apparent violations and deficiencies relating to CBNY’s failure to:

1. Maintain adequate policies and procedures designed to insure proper screening of new accounts in the private banking area;

2. Know its customers and document such knowledge with records that establish the customer’s identity, source of wealth, net worth, expected or anticipated level of account activity, and memorialize the substance of contacts with customers;

3. Design and maintain processes and procedures that would be reasonably likely to detect suspicious customer activities and provide for the reporting of such activities to the appropriate authorities pursuant to the Bank Secrecy Act, 31 U.S.C. §§ 5311-5330, and 31 C.F.R. Part 103 ("BSA") and 3 N.Y.C.R.R. Part 300;

4. Periodically review customer account activity with account managers, and establish levels of expected activity, in order to be able to assess whether particular transactions are of a consistent nature and within expected levels;

5. Provide comprehensive and effective know your customer and suspicious activity reporting training to all appropriate personnel;

6. Adopt and implement written policies and procedures necessary to adequately screen, monitor and verify wire transfers and other account transactions to assure compliance with the U.S. Department of Treasury’s Office of Foreign Assets Control ("OFAC"), 31 C.F.R. Part 500 et seq., as well as any rules and guidelines issued or administered by OFAC.

WHEREAS, pursuant to New York Banking Law §44, the Banking Department is assessing a monetary payment of $ 4.25 million on behalf of the people of the State of New York based on CBNY’s failure to maintain processes and procedures reasonably designed to ensure the detection and reporting of suspicious activity as required by 3 N.Y.C.R.R. Part §300;

WHEREAS, on October 8, 2001, the board of directors of CBNY, at a duly constituted meeting, adopted a resolution:

1. Authorizing and directing Mr. Jacob Berman, President and Chief Executive Officer of CBNY, to enter into this Order on behalf of CBNY, and to consent to compliance on behalf of CBNY with each and every provision of this Order;

2. Waiving the issuance of a notice of assessment of monetary penalty on any and all matters set forth in this Order;

3. Waiving a hearing for the purpose of taking evidence on any and all matters set forth in this Order;

4. Waiving any and all rights to judicial review of this Order; and

5. Waiving any and all rights to challenge or contest the validity, effectiveness, terms or enforceability of the provisions of this Order.

NOW, THEREFORE, before the taking of testimony or the making of any findings of fact or conclusions of law, and without this Order constituting an admission of wrongdoing or an adoption, approval or admission of any allegation made or implied by the Department in connection with this proceeding, and solely for the purpose of settling the instant proceeding without protracted or extended hearings, and pursuant to the aforesaid resolution:

IT IS HEREBY ORDERED, that CBNY shall cease and desist from committing any further violations of the nature described herein, and shall take the following affirmative actions to correct the deficiencies described above:

1.     Within 45 days of this Order, CBNY or its successor, New Commercial Bank of New York ("New CBNY"), shall submit to the Department an acceptable written Enhanced Compliance Program designed to monitor compliance with the recordkeeping and reporting requirements of the Bank Secrecy Act and 3 N.Y.C.R.R. Part 300. The program will require (1) the collection and verification, prior to account opening, of documentation that establishes account holder identity, source of wealth, net worth, and expected levels of account activity, and (2) the institution of policies and procedures that will substantially increase the likelihood that suspicious activities will be detected, recorded, tracked and reported to the appropriate authorities, as required by law and regulations. At a minimum, the Enhanced Compliance Program shall include:

  1. An effective internal compliance program and system of internal controls;
  2. Independent testing for compliance with the Bank Secrecy Act;
  3. Designation of a qualified individual or individuals responsible for coordinating and monitoring day-to-day compliance with the Bank Secrecy Act;
  4. Comprehensive and effective know your customer and suspicious activity reporting training for appropriate personnel. Such training shall be conducted by competent and qualified personnel, knowledgeable in all aspects of the relevant laws, regulations, and internal policies and procedures;
  5. Based on a risk-focused review of customers, an update and enhancement of policies and procedures relating to the verification of identification of account holders and the monitoring of account transactions. The extent of account monitoring will be based on the results of the risk review;
  6. Development and implementation of a procedure relating to suspicious or unusual activity to ensure (1) that potential suspicious or unusual activities, including but not limited to, currency and wire transactions, are properly identified and reported pursuant to state and federal regulations, and (2) that all activities of a suspicious nature are properly logged, followed up, reviewed, and investigated;
  7. Adoption by CBNY or its successor, New CBNY, of written policies and procedures relating to the verification and screening of accounts, wire transfers and other account activity to ensure compliance with the U.S. Department of Treasury’s Office of Foreign Assets Control ("OFAC"), 31 C.F.R. Part 500 et seq., as well as any rules and guidelines issued or administered by OFAC.

2. The programs, plans and procedures required in this Order shall be submitted to the Department for review and approval. In assessing the sufficiency of such programs, plans and procedures, the Department will take into account the business activities of CBNY or New CBNY. Acceptable programs, plans, and procedures shall be submitted within the time periods set forth in this Order. CBNY or New CBNY shall adopt the approved programs, plans, and procedures within 10 days of approval and then shall fully comply with them. During the term of this Order, the approved programs, plans, and procedures shall not be amended or rescinded without the prior written approval of the Department.

3. Within 15 days after the end of each quarter following the date of this Order, CBNY or New CBNY shall submit a written progress report to the Department detailing the actions taken to comply with each provision of this Order and the results of those actions. The Department may, in writing, discontinue the requirement for progress reports or modify the reporting schedule.

4. CBNY shall make a monetary payment in the sum of $ 4.25 million to the Department, pursuant to New York Banking Law § 44, for the failure to establish and maintain safe and sound practices and adequate policies and procedures reasonably designed to assure and monitor compliance with reporting requirements set forth in 3 N.Y.C.R.R. Part 300. The monetary penalty assessed by this Order shall be remitted to the Department by wire transfer in immediately available funds to the Department’s account at Chase Manhattan Bank.

5. All communications regarding this Order shall be sent to:

  1. Mr. P. Vincent Conlon
    Deputy Superintendent of Banks
    New York State Banking Department
    2 Rector Street
    New York, NY 10006
  2. Mr. Jacob Berman
    Chief Executive Officer
    Commercial Bank of New York
    New York, NY 10036

6. The provisions of this Order shall be binding, where applicable, on CBNY or New CBNY.

7. Each provision of this Order shall remain effective and enforceable until stayed, modified, terminated or suspended in writing by the Department.

8. Notwithstanding any provision of this Order, the Department may, in its sole discretion, grant written extensions of time to CBNY or New CBNY to comply with any provision of this Order.

9. The provisions of this Order shall not bar, stop or otherwise prevent the Department or any federal or state agency from taking any further or other action affecting CBNY or New CBNY.

By order of the Superintendent of Banks of the State of New York, effective this 8th day of October, 2001. 

NEW YORK STATE BANKING
DEPARTMENT

By:_____________________
Elizabeth McCaul
Superintendent of Banks

COMMERCIAL BANK OF NEW YORK
New York, NY

By:____________________
Jacob Berman
President and Chief Executive Officer

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