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UNITED STATES OF AMERICA BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D.C. ) Written Agreement VALLEY By and Between INDEPENDENT ) 1 ) Docket BANK El Centro, California 1 and ; FEDERAL ) ) RESERVE San Francisco. BANK OF SAN FRANCISCO Califolmia WHEREAS. 1 in Irecognition of the common goal of continuing strengthen the inter-nal controls and procedures at thevalley California (the “Bank”). the Bank and the Federal Reserve Bank of San Francisco Agreement regulations (collectively Transactions Reponing Bank, El Centro. Reserve System, Bank”) of deficiencies, and procedures Act (3 I U.S.C. issued by [Ix I~!.S. I)epartment and have mutually (the “Agreement”); its policies for compliance 53 I I g =.) for the identification the Bank is taking with thr Cur~wncy and the accoml)ati!fitl~, of the ‘l‘~wawr~y (3 I C.F.R. referred IO :L\ the Bank Secrecy Act (the “USA”)), practices and policies and prwxdurcs and (the “Reserve as the result of the identification steps to: (1) enhance and improve and Foreign Independent to improve a state chartered bank that is a member of the Federal agreed to enter into this Written WHEREAS. No. Ol-002.WAIRB-SM 103. I I g S.J as well as customc’r due tiiliFcnce and reporting of suspicio~~s act~viry: (2) ensure full Regulation System compliance with H (12 C.F.R. (“Board 208.62 of Governors”) WHEREAS, directors, on behalf a resolution authorizing U.S.C. by section IX 13(u)), indirectly, on January 8, 2001, the executive and directing Dennis to compliance Deposit Insurance Act, as amended I. The Bank, report the BSA or any rules or regulations of Examination To assist the Bank in correcting of policies the BSA and the requirement suspicious of a qualified Reserve activity. Within independent meeting, adopted on behalf parties, (the “FDI as Act”) Bank. (12 party thereof. issued pursuant of the Bank agree as follows: thereto shall not, directly and shall correct as of October any existing violations and prtrcedurcs of the BSA, dc\igncd of the Board 01’Govct-nors 16, 2000. 30 days of this Agrecmcnc, accounting to itlelltil’y and 111~.Bank 41;dl engage the firm or qualil’ied consulting as to ensure future among other things: public of of this Agreement. and any institution-affiliated cited in the Report constituted L. Kern to enter into this Agreement the Bank and the Reserve (a, scrviccs at a duly THEREFORE, with and of the board of by the Bank and its institution-affiliated as assist the Bank in the development accur;neiy of the Bank, NOW, 2. the BSA, of the Federal committee provision violate compliance of Governors each and every all BSA violations well of the Board including ; and 3(u) of the Federal with laws and regulations, and 208.63) of the board of directors the Bank and consenting defined all applicable firm or (the “consultant”), Bank’s current diligence acceptable internal controls new policies the commencement engagement Within of the review, letter that delineates that the review will documents and records not limited to, work Bank detailing paragraph designed 2, hereof, Within of over $10.000 (bJ requit-emenrs review customer and recommend, of the due where by the Bank. of the consultant, Bank The engagement for approval an letter shall specify not to exceed shall 30 days. In have access 10 all and that all information related but prior to to the review including, but shall be provided to upon request. of the review, from the review submit all provisions a copy of the consultant’s shall be provided report Bank an acceptable of the BSA, and reporting including, repon to the Reserve of the consultant’s to the Reserve the recordkeeping required writlen by program bur not limited requirements Bank. to: for cun-ency (3 I C1.F.R. 103.22); 111~identification lor cul-rency Cc) activity time period, 45 days of the completion wilh compliance, that the consultant and procedures and complete to the Reserve the review Upon completion the Bank shall (3) rcpor’ing a reasonable to conduct and conclusions to ensure compliance Il~ansactions of suspicious to be implemented within by the consultant 3. to BSA the scope of the review. necessary a full 10 days of the engagement papers, programs the findings related letter shall acknowledge Cc) to conduct the Bank shall submit be completed the engagement rhe Reserve and reporting and procedures (b) Bank, and procedures and the identification necessary, addition, to the Reserve requirements transactions the exemption of over proccdut-es r~elared 10 the recordkeeping $iO,OOO (31 CF.R. 103.2X): (31 C.F.II. and 103.22); and Cd) and the retention period 4. paragraph against by the suspicious C.F.II. 208.62). activity the Bank reporting The enhanced (a) not require monitoring necessary heightened risk ol’illicit procedures cuslomcr: the identity program the categories determine shall, (12 provide: base of the Bank to: whose transactions of their banking level of enhanced that the Bank has reason to believe at or through as required of Governors at a minimum, of customers the appropriate criminal authorities of the customer and usual nature ensure the or suspected H of the Board by enhanced to reasonably and supervisory assessment activities; and due diligence pose a the Bank. For those customers whose transactions require enhanced due to: 6) confirln identify repot-t required an acceptable of known of Regulation due diligence of customers activities (b) diligence. provisions because of the routine for those categories reporting For a risk focused (ii) Bank, to law enforcement customer (i) of the consultant’s shall be designed and complete to be maintained 103.38). IO the Reserve The program accurate or involving to the nature of records 45 days of the completion program. and timely, related (31 C.F.R. the Bank shall submit due diligence identification activity of such records Within 2, hereof, customer the requirements and business determine activities the appropriate documentation necessary to of rhc customer; (ii) understand (iii) report rile normal and expected tranwcti~xls of the and Suspicious actIvitics in compliance with existing do reporting requirements set forth 5. paragraph Within 2, hereof, program, Governors (12 C.F.R. a minimum, as required 208.63), the BSA designed (12 C.F.R. report Bank an acceptable provisions of Regulation to, among other things, ensure issued pursuant 208.62). required enhanced by written H of the Board of and maintain thereto. compliance The program, at shall: establish the HSA and the rules and regulations to detect and monitor transactions and that there is full (b) all applicable activity, to the Reserve by the applicable of Governors of the consultant’s and the rules and regulations (a) purposes H of the Board 45 days of the completion the Bank shall submit compliance by the Bank with in Regulation issued pursuant compliance provide rules and regulations with the appropriate (c) managetl by a qualified authority to oversee including, without I;I\v enlixcement senior with all applicable thereof to ensure compliance including audits segregation officer testing are performed conducted of compliance with frequently. are fully the BSA and of suspicious documented, and of duties. BSA compliance and enhanced author-ities and procedures for illegitimate and reporting who possesses the appropriate the idcntibcation policies with laws and regulations; and the identification ensure that the Bank’s and supervisory thereto. for independent the BSA compliance limitation, controls to ensure that they are not being and ensure that compliance are conducted a system of internal customer and timely. of unusual program is supervised experience. training due diligence activity and programs, accu~mt~~ and complete or suspiciws and reporting or known or to suspected criminal applicable laws, activity perpetrated regulations and rules; provide (d) limited to, tellers. banking officers customer repotting of suspicious personnel September report when the Reserve Bank. 7. paragraphs periods programs comply approved with engagemenl and procedures related conducted all to the BSA but not and personal by competent related on a regular (including. private to the BSA, personnel, accurate and the identification and basis to ensure that all quarter the date of this Agreement, Bank detailing the actions of those actions. releases the Bank from shall submit in thih .A;reement. During policies and the results The Bank them personnel), 31) following in writing, that arc approwxl with and up to date information. 2(b). -3, 4 and 5 hereof set forth officers, contact requirements to the Reserve of this Agreement in accordance personnel 45 days after the end of each calendar 30 and December progress provision Within lending and update the training have the 1most current 6. written activity the Bank to all appropriate representatives, and internal and form completion or involving and training and all other customer in all aspects of regulatory recordkeeping service against the engagement that are acceptable (March the Bank taken to comply Such reports making letter to the Reserve Bank wiihin the term of this Agreement. and programs within lcrl~‘r and programs without Bank. -6 IO days of approval lhc Bank shall the pr-iot- written with a each reports. The Bank shall adopt the engagemeni by the Rescrw shall submit may be discontinued further Bank 3 1, June 30, required the time letter and the and then shall fully not amend or rescind appl-oval by ol’the Reset-vr the All 8. communications regarding Mr. Philip (a) this Agreement shall be sent to: Ryan Director Federal Reserve IO 1 Market Street San Francisco, Mr. William Executive Valley The pt-ovisions 10. until stayed, Vice. President with Bank Street California 92243-995 of this Agreement or suspended shall remain by the Reserve successors effective and assigns. and enforceable Bank. of this Agreement grant written on the Bank and each extensions to the contrary, the of time to the Bank to comply of Ihi% Agreement. 12. The Ipwvisions of this Agreement the Board of Gc~vc~m)~-s, or any other- federal any other action as such, and their any provision may. in its sole discretion, I shall be binding of this Agreement Notwithstanding any provision prevent terminated, Bank in their capacities Each provision modified, Il. Reserve parties 94105 F. Henle 1498 W. Main of its institution-affiliated California Independent El Centro, 9. Bank of San Francisco aflec~ing or their succcs’rors. or state agrncy the Bank, or any of its current 01~assign\. shall not bar, escop. or otherwiw or fol-mer or department. institution-aff‘iliatcd from Iakin? parties, 13. This Agreement is a “written agreement” for the purposes of, and is enforceable by the Board of Governors as an order issued under, section 8 of the FDI Act (12 U.S.C. 1818). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 81hday of January, 200 I. Federal Reserve Bank of San Francisco ,, ‘~ Mr. Dennis L. Kern President and Chief Executive Officer -J$$gf+ By: Director