A federal regulator has ordered a small Bergen County bank taken over last year by private equity magnate J. Christopher Flowers to stop conducting certain businesses until it beefs up its ability to fight money laundering.
Saddle River Valley Bank, which operates two branches and has roughly $118.5 million in assets, also was ordered by the Office of the Comptroller of the Currency to perform a “lookback” review of all wire and account activity between Aug. 1, 2009 and the date upon which it stopped conducting such activity with certain unnamed “foreign correspondent banking relationships.” The bank also must hire an independent consultant to assess risks in the bank and its ability to comply with federal laws that require financial institutions to detect and prevent money laundering, with particular emphasis on wires and remittances.
The cease and desist order, issued in October but only publicly released last week, did not allege any money laundering occurred through the bank’s systems. But the OCC said the bank “engaged in unsafe or unsound banking practices” and violated the law by failing to have procedures reasonably designed to comply with the Bank Secrecy Act, the federal anti-money laundering law.
The regulator also told Saddle River Valley to not restart its international wire transfer business until it has an automated system for detecting suspicious transactions. The bank also cannot accept “remote deposit capture” transactions from money service businesses, such as check cashers, money transmitters and currency dealers, until it has systems to conduct due diligence on its customers, their lines of business and the clients of the bank’s customers. Remote deposit capture allows checks to be deposited without the bank physically receiving them.
The regulatory issues at Saddle River Valley likely came as a surprise to J.C. Flowers & Co., which purchased a majority stake in the closely-held bank in October of last year. The private equity firm said in a statement to The Star-Ledger that it learned of “certain issues” after the transaction.
The order, which bank officials consented to, grew out of an examination by the Office of Thrift Supervision, the primary regulator of Saddle River Valley that was folded into the OCC earlier this summer.
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