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UNITED STATES OF AMEKICA BEFORE THE BOARD OF GOVERNORS In the Matter of OF THE FEDERAL RESERVE SYSTEM ) ) Docket No. 00-O 19-B-SM ) UNITED CENTRAL BANK Garland, Texas ) Order to Cease and Desist i ) WHEREAS, in recognition of the common goal of the Board of Governors of the Federal Reserve System (the “Board of Governors”) Texas (the “Bank”) to ensure compliance and the United Central Bank, Garland, with all applicable federal and state laws, rules, and regulations, the Bank has consented to the issuance of this Cease and Desist Order (the “Order”); WHEREAS, as the result of the identification of deficiencies in its operations, the Bank is taking steps to enhance and improve its policies and procedures for compliance with all applicable laws, regulations and guidelines, including the Currency and Foreign Transactions Reporting Act (3 1 U.S.C. 53 11 g q.) and the rules and regulations issued thereunder by the U.S. Department of the Treasury (3 1 C.F.R. 103.1 I g 3.) (collectively referred to as the Bank Secrecy Act (the “BSA”)) and the applicable provisions of Regulation H of the Board of Governors (12 CFR 208.62 and 208.63); WHEREAS, on OCTOO& t\c, a resolution authorizing and directing 2000, the board of directors of the Bank adopted Kwxi \NALtL Order on behalf of the Bank, and consenting to compliance and the Bank’s institution-affiliated to enter into this by the board of directors of the Bank parties, as defined in section 3(u) of the Federal Deposit Insurance Act, as amended (12 U.S.C. 18 13(u)), to comply with each and every provision of this Order; and waiving any and all rights that the Bank may have pursuant to 12 U.S.C. 1818: to the issuance of a notice of charges and of hearing on any matter set forth in this Order; to a hearing for the purpose of taking evidence on any matters set forth in this Order; to judicial review of this Order; and to challenge or contest, in any manner, the basis, issuance, validity, terms, effectiveness or enforceability of this Order or any provision hereof. NOW, THEREFORE, before the taking of any testimony or adjudication finding on any issue of fact or law herein, and without this Order constituting of, or an admission or denial of any allegation made or implied by the Board of Governors, and solely for the purpose of settlement of this proceeding without protracted or extended hearing or testimony and pursuant to the aforesaid resolutions: IT IS HEREBY ORDERED that the Bank and its institution-affiliated parties cease and desist and take affirmative action as follows: 1. GO The Bank and its institution-affiliated parties shall not, directly or indirectly, violate the BSA or the rules or regulations issued pursuant thereto, and shall correct all BSA violations cited at previous examinations. 2 (b) For the purposes of this Order, the term “violate” shall include any action (alone or with another or others) for or toward causing, bringing about, participating in, counseling or aiding or abetting a violation. (cl To ensure that the Bank does not violate any of the provisions of the BSA or the rules or regulations issued pursuant thereto, the Bank shall, within 45 days of this Order, submit to the Federal Reserve Bank of Dallas (the “Reserve Bank”) an acceptable written plan designed to ensure compliance with: 0) the recordkeeping and reporting requirements for currency transactions of over $10,000 (31 C.F.R. 103.22); (ii) and reporting requirements the identification requirements related to the recordkeeping for currency transactions of over $10,000 (3 I C.F.R. 103.28); (iii) the recordkeeping requirements for the purchase of bank checks and drafts, cashier’s checks, money orders and traveler’s checks (31 C.F.R. 103.29); and (iv) the requirements related to the nature of records to be maintained and the retention period of such records (31 C.F.R. 103.38). 2. Within 45 days of this Order, the Bank shall submit to the Reserve Bank an acceptable written enhanced customer due diligence program. to reasonably ensure the identification The program shall be designed and timely, accurate and complete reporting of known or suspected criminal activity against or involving the Bank to law enforcement 3 and supervisory authorities, as required by the suspicious activity reporting provisions of Regulation H of the Board of Governors (12 CFR 208.62). The enhanced customer due diligence program shall provide: (a) For a risk focused assessment (0 not require monitoring of the customer base of the Bank to: identify the categories of customers whose transactions do because of the routine and usual nature of their banking activities; and (ii) 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: (9 determine the appropriate documentation necessary to confirm the identity and business activities of the customer; (ii) understand the normal and expected transactions of the (iii) report suspicious activities in compliance with the reporting customer; requirements of Regulation H of the Board of Governors; and (iv) establish controls to reasonably ensure the detection of possible or potential check kiting activity and to prevent loss from check kiting activity, including, but not limited to, (A) the establishment designed to detect check-kiting and use of management activity; (B) the prevention of unauthorized 4 information resubmission systems of checks for collection that are initially returned for insufficient funds: and (C) the development of procedures for closing account(s) used for suspected check kiting activity. 3. Within 45 days of this Order, the Bank shall submit to the Reserve Bank an acceptable written compliance program, as required by the applicable provisions of Regulation H of the Board of Governors (12 CFR 208.63) designed to, among other things, ensure and maintain compliance pursuant thereto. by the Bank with the BSA and the rules and regulations issued The program, at a minimum, (a) shall: 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 (b) with all applicable laws and regulations; provide for independent testing of compliance with all applicable rules and regulations related to the BSA and the reporting of suspicious transactions, and ensure that compliance audits are performed frequently, are fully documented, and are conducted with the appropriate segregation of duties; (c) 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, (i) the identification law enforcement and timely, accurate and complete reporting to and supervisory authorities of unusual or suspicious activity or known or 5 suspected criminal activity perpetrated against or involving the Bank, and (ii) monitoring the Bank’s compliance and ensuring that full and complete corrective action is taken with respect to previously identified violations and deficiencies; (4 and provide appropriate training to all affected personnel, conducted by competent staff, which includes all relevant BSA and related requirements concentration on accurate recordkeeping, with a specific form completion and the detection and reporting of known and/or suspected criminal activity. 4. Within 45 days of this Order, the Bank shall submit to the Reserve Bank an acceptable written plan designed to ensure compliance with the regulations of the U.S. Department of the Treasury’s Office of Foreign Asset Control (“OFAC”) (3 I CFR 500 g se-~.), as well as any rules and guidelines issued or administered by OFAC. The plan shall include, at a minimum, procedures to ensure that customer transactions are processed in accordance with OFAC requirements and in accordance with a regularly updated list of entities and individuals whose transactions or assets are required to be blocked, frozen or monitored. 5. The written plans and programs required by paragraphs l(c), 2, 3 and 4 hereof shall be submitted to the Reserve Bank for review and approval. Acceptable plans and programs shall be submitted within the time periods set forth in this Order. The Bank shall adopt the approved plans and programs within IO days of approval by the Reserve Bank, and then shall fully comply with them. During the term of this Order, the approved plans and programs shall not be amended or rescinded without the prior written approval of the Reserve Bank. 6 6. Within 10 days after the end of each calendar quarter (December 3 1, March 3 1, June 30, and September 30) following the date of this Order, the Bank shall furnish a written progress report detailing the form and manner of all actions taken to secure compliance with this Order, and the results thereof. 7. All communications (a) (b) regarding this Order shall be sent to: Mr. W. Arthur Tribble Vice President Federal Reserve Bank of Dallas P.O. Box 655906 Dallas, Texas 75201-5906 -0 C- me \c2,i-* *,+~ LHfzb 3La,o,-N-r b United Central Bank P.O. Box 462261 Garland. Texas 75046 8. institution-affiliated 9. The provisions of this Order shall be binding on the Bank and each of its parties in their capacities as such, and their successors and assigns, Each provision of this Order shall remain effective and enforceable until stayed, modified, terminated, or suspended by the Board of Governors. 10. Notwithstanding any provision of this Order, the Reserve Bank may, in its discretion, grant written extensions of time to the Bank to comply with any provision of this Order. 7 I I. The provisions of this Order shall not bar, estop or otherwise prevent the Board of Governors or any federal or state agency or department from taking any other action affecting the Bank or any of its current or former institution-affiliated Bday parties. By order of the Board of Governors of the Federal Reserve System effective this November of m ) 2000. UNITED CENTRAL BANK BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Secretary of the Board