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Banking Department Issues Consent Order to Cease and Desist
to Canisteo Savings and Loan Association

State of New York Banking Department


In the Matter of
Canisteo Savings and Loan Association
Canisteo, New York

Order to Cease and
Desist Issued Pursuant to
Banking Law Section 39
Upon Consent


WHEREAS, Canisteo Savings and Loan Association (“Savings Association”), located at 1 Main Street, Canisteo, New York, 14823-1125, is a state-chartered Savings and Loan Association organized under the Banking Law  of the State of New York (“BL”) that is regulated and supervised by the New York State Banking Department (“Banking Department”) and the Office of Thrift Supervision (“OTS”), and is subject to the laws and regulations of New York, as well as applicable federal laws and the regulations of the OTS; and

WHEREAS, the Banking Department and the OTS share responsibility for the periodic examination of the Savings Association; and

WHEREAS, the OTS conducted an examination of the Savings Association that was completed on December 28, 2006 (“Examination”); and

WHEREAS, the findings of the Examination established that the Savings Association is, and has been, conducting business in an unauthorized and unsafe and unsound manner, and identified certain supervisory concerns relating to the conduct of its business, including, but not limited to, numerous apparent violations of federal laws and regulations;

WHEREAS, the Superintendent has determined that the Savings Association has failed to establish the controls, policies and procedures necessary to ensure that it operates in a safe, prudent and lawful manner; and

WHEREAS, the Superintendent possesses the authority under BL § 39 to issue an order to the Savings Association to discontinue unlawful, unauthorized or unsafe practices; and

WHEREAS, the Superintendent believes that prompt enforcement action is necessary to address the numerous supervisory concerns cited herein; and;

WHEREAS, on June 25, 2007, at a duly constituted meeting, the board of directors of the Savings Association (“Board”) adopted resolutions:

  1. Authorizing and directing William F. Case, President to enter into this Order on behalf of the Savings Association and consenting to compliance by the Savings Association with each and every provision of this Order; and
  2. Waiving any and all rights that the Savings Association might have, pursuant to BL § 39, with respect to:
    1. the issuance of a notice of charges and of hearing on any matter set forth in this Order;
    2. a hearing for the purpose of taking evidence on any matters set forth in this Order;
    3. judicial review of this Order; and
    4. challenging or contesting, in any manner, the basis, issuance, validity, terms, effectiveness or enforceability of this Order or any provision thereof.

NOW, THEREFORE, before the taking of any testimony or the making of any findings of fact or conclusions of law, and without this Order constituting an admission or denial of any allegation made or implied by the Banking Department in connection with this proceeding, and solely for the purpose of settlement of this proceeding without a protracted or extended hearing, and pursuant to the aforesaid resolutions,

IT IS HEREBY ORDERED, PURSUANT TO BL § 39:

  1. Compliance With Laws and Regulations.

    1. The Savings Association and its directors, officers, employees, and agents shall cease and desist from committing any actions that constitute violations of:

      1. The Currency and Foreign Transactions Reporting Act, as amended by the USA Patriot Act and other laws (the “Bank Secrecy Act” or “BSA”), 31 U.S.C. §§ 5311 et seq., and the related regulations promulgated pursuant thereto by the United States Department of Treasury, 31 C.F.R. §§ 103.11 et seq., and the related BSA regulations issued by the OTS, 12 C.F.R. § 563.177 (collectively with the aforementioned laws and regulations, the “BSA Laws and Regulations”), or the applicable regulation of the Banking Department (3 N.Y.C.R.R. Part 300);

      2. The OTS’ Rules concerning Loans in Areas Having Special Flood Hazards, 12 C.F.R. Part 572, including but not limited to 12 C.F.R. § 572.6 (required use of standard flood hazard determination form);

      3. The OTS’ Rules concerning Privacy of Consumer Financial Information, 12 C.F.R. Part 573, including but not limited to 12 C.F.R. § 573.4 (requiring provision of initial privacy notices to consumers);

      4. The Truth in Lending Act, 15 U.S.C. §§ 1601 et seq., and the regulation (“Regulation Z”) issued thereunder by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 226, including but not limited to 12 C.F.R. § 226.24 (concerning disclosure of annual percentage rates in advertisements);

      5. The Truth in Savings Act, 12 U.S.C. §§ 4301 et seq., and the regulations (“Regulation DD”) issued thereunder by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 230, including but not limited to 12 C.F.R. § 230.8 (rules concerning advertising of interest rates/annual percentage yields on deposit accounts);

      6. The Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601 et seq., and the regulation (“Regulation X”) issued thereunder by the U.S. Department of Housing and Urban Development, 24 C.F.R. Part 3500, including but not limited to 24 C.F.R. 3500.15 (requiring written disclosure of affiliate business relationships);

      7. The Equal Credit Opportunity Act, 15 U.S.C. §§ 1601 et seq., and the regulation (“Regulation B”) issued thereunder by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 202, including but not limited to 12 C.F.R. §§ 202.9, 202.12, and 202.14 (rules on providing appraisal reports); and

      8. The homeownership counseling provisions of the National Housing Act, 12 U.S.C. § 1701x, including but not limited to 12 U.S.C. § 1701x(c)(5) (notification of availability of homeownership counseling).

  2. Effective Implementation of Anti-Money Laundering/BSA Compliance Program.

    1. The Savings Association shall implement its BSA Compliance Program, which was adopted pursuant to 12 C.F.R. § 563.177, so that, at a minimum, it provides for:

      1. The implementation of a system of internal controls to ensure compliance with (1) the BSA Laws and Regulations, 2) the applicable regulation of the Banking Department (3 N.Y.C.R.R Part 300), and 3) the regulations of the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC) (31 C.F.R. Part 500). Such internal controls must include policies and procedures designed to detect, monitor, and report all suspicious transactions, and to otherwise assure that there is full compliance with all applicable laws and regulations;

      2. Independent testing of compliance with all applicable BSA Laws and Regulations and all applicable regulations requiring the reporting of suspicious transactions by a qualified, independent consultant. The independent testing must be performed with appropriate frequency and be fully documented.

      3. A full-time officer or employee who is (1) designated as the BSA Officer, and (2) actively managing, coordinating and monitoring the Savings Association’s day-to-day compliance with the BSA Laws and Regulations as well as the Savings Association’s BSA compliance program. The Savings Association’s designated BSA officer shall have day-to-day responsibility for all BSA compliance and related matters, including, without limitation: (A) the filing of Currency Transaction Reports when required, (B) the identification and timely, accurate and complete reporting, as required by law, and to supervisory authorities, of suspicious activity against or involving the Savings Association, and (C) ensuring that full and complete corrective action is taken with respect to previously identified violations and deficiencies;

      4. BSA-related training by qualified consultants for all appropriate Savings Association personnel.

    2. Within forty-five (45) days of the effective date of the OTS’ parallel Order dated 5/29/07, the Savings Association shall engage a qualified, independent BSA consultant/service-provider (the “BSA Consultant”), whose acceptability to the OTS and the Banking Department must first be evidenced in writing, to assist the Savings Association in developing, within ninety (90) days of the effective date hereof, written policies, procedures and processes (which may include outsourcing, as appropriate) that will reasonably ensure that the Savings Association fulfills its obligations under the BSA Laws and Regulations, the applicable state regulation, and the BSA-related provisions of this Order.

    3. Within 120 days of the effective date of the OTS’ parallel Order dated 5/29/07, and following consideration of the recommendations and other guidance from the above-referenced BSA Consultant, the Savings Association shall: (i) by duly recorded action of its Board, formally adopt written policies, procedures and processes to ensure the effective implementation of its BSA compliance program, and (ii) effectively implement such program.

    4. On a monthly basis, the Board shall review the Savings Association’s implementation of the BSA Compliance Program.

    5. At least semi-annually, the Board shall review (which may involve guidance from a qualified BSA consultant) the Savings Association’s BSA compliance program to determine whether changes in such program may be necessary to adjust to: (i) changes to the BSA Laws and Regulations (as well as related forms), and (ii) changes in the Savings Association’s operations that may affect its compliance with the BSA Laws and regulations.

  3. Compliance Program Management, Staffing and Resources.
    1. The Savings Association, at all times, shall have and implement an effective compliance management program, i.e., a program (with policies and procedures) for implementing and adhering to the Truth in Lending Act, the Truth in Savings Act, the Real Estate Settlement Procedures Act, the Federal Trade Commission Act, and the other laws and regulations that are referenced in Section 1100 of the OTS’ Examination Handbook (collectively the “Compliance Laws and Regulations”).

    2. In view of the limited full-time staffing of the Savings Association, the Savings Association’s compliance management program may provide for outsourcing to qualified service providers, whose work shall be performed under the direction of the Savings Association’s President. However, any such outsourcing shall not relieve the Savings Association, its officers and its Board of their responsibility to comply with laws and regulations.

    3. Within ninety (90) days of the effective date of the OTS’ parallel Order dated 5/29/07, the Savings Association shall commence implementation of a written compliance management program, customized to the activities and needs of the Savings Association, that meet the following requirements:

      1. The Board must review and approve the written compliance management program, and such approval must be documented in the minutes of the meeting of the Board during which such action was taken.

      2. The written compliance management program, which must be reasonably designed to cause the Savings Association to comply with the compliance laws and regulations, must, at a minimum, incorporate the following six SMAART components (which are described further in the OTS’ written guidebook entitled “Compliance: A Self-Assessment Guide”):

Systems

The embodiment of task-specific procedures and internal controls that ensure that transactions are conducted and recorded in compliance with legal obligations and customer-service goals.

Monitoring

The process of supervising the day-to-day or week-to-week functioning of the Savings Association’s compliance systems to assure real-time execution in accordance with program standards.

Assessment

The periodic review of system records and operations to identify transactional violations and program deficiencies.

Accountability

The arrangement of responsibility, authority and reporting relationships that provides direction to staff for implementing institution compliance policy and apprises senior management and the directors about compliance program performance.

Response

The process of addressing consumer complaints, remedying regulatory violations, amending procedures and controls, correcting internal oversight deficiencies, and implementing policy and system revisions or updates.

Training

The communication to appropriate Savings Association personnel of compliance policies, procedures, directives, regulatory requirements, product information and service goals. Also addressed by this component is the commitment and manner in which the Savings Association develops and maintains staff expertise. 

      1. Among other things, the written Compliance Management Program shall include policies, procedures, and checklists.  In addition, it shall indicate the persons (including service providers) who shall be responsible for preparing particular documents and taking other actions required by the applicable Compliance Laws and Regulations.

  1. Board Oversight Committee.

    1. No later than thirty (30) calendar days following the effective date of the OTS’ parallel Order dated 5/29/07, the Board shall establish and appoint an oversight committee of the Board (the “Oversight Committee”) comprised of three or more directors, the majority of whom shall be Outside Directors, to monitor and coordinate the Savings Association’s compliance with the provisions of this Order.

    2. No less than monthly, the Savings Association’s management shall provide to the Oversight Committee such information and reports as are necessary to allow said Committee and the Board to monitor the Savings Association’s compliance and/or non-compliance with the requirements of this Order.

    3. Within thirty (30) days after the end of each calendar quarter, the Oversight Committee shall submit a written progress report to the Board that:

      1. Details the actions taken by the Savings Association to comply with each provision of this Order;

      2. Identifies all violations of this Order, and further describes all remedial actions that have been effected and/or that are contemplated with respect to such violations.

    4. Within forty-five (45) days after the end of each calendar quarter, the Board shall submit to the Banking Department:

      1. A copy of the Oversight Committee’s quarterly progress report required by the foregoing subparagraph, with any additional comments made by the Board; and

      2. A written certification that each director has reviewed the report.

    1. Nothing contained herein shall diminish the responsibility of the entire Board to ensure the Savings Association’s compliance with the provisions of this Order.

General Provisions

  1. All communication regarding this Order shall be sent to:
    Mr. Manuel Kursky
    Deputy Superintendent 
    New York State Banking Department
    1 State Street
    New York, New York 10004-1511

  2. The provisions of this Order shall be binding upon the Savings Association, its directors, officers, employees agents successors and assigns.

  3. This Order shall not bar or estop the Banking Department or any other state or federal agency from taking any additional action with respect to Savings Association, or any of its officers, directors or employees successors or assigns.

  4. The provisions of this Order shall remain effective and enforceable until such time as they have been modified, suspended, terminated or set aside by the Superintendent.

  5. This Order shall become effective immediately upon execution of the last signature required below.

By Order of the Superintendent, dated this 28th day of June, 2007.

Signed: William F. Case, President                6-25-07
Canisteo Savings and Loan Association           Date

Signed: Manuel Kursky                                  6-28-07
Deputy Superintendent                                    Date

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