Bank Enforcement Actions—Roundtable With

the Experts: New Issues, Higher Penalties,

Joint Enforcement Actions Preparing for Scrutiny of AML/OFAC Policies, BHC Capital and Stress Test Issues, D&O Liability, and More

Today’s faculty features:

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TUESDAY, SEPTEMBER 16, 2014

Presenting a live 90-minute webinar with interactive Q&A

Thomas P. Vartanian, Partner, Dechert, Washington, D.C.

Richard M. Alexander, Partner, Arnold & Porter, Washington, D.C.

Ronald Glancz, Partner, Venable, Washington, D.C.

Robert H. Ledig, Partner, Dechert, Washington, D.C.

Andrew L. Sandler, Chairman & Executive Partner, Buckley Sandler, Washington, D.C.

Ryan T. Scarborough, Partner, Williams & Connolly, Washington, D.C.

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4

Overview of Federal

Bank Enforcement Actions

Presented by

Venable LLP

Ronald R. Glancz, Esq. (Chair, Financial Services Group)

Ralph Sharpe, Esq., Thomas Gilbertsen, Esq., Peter Frechette, Esq.

© Venable 2012

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Discussion Topics

Statutory Authority for Bank Enforcement Powers

Section 8 of the Federal Deposit Insurance Act

12 U.S.C.§1818 (termination/suspension of insurance,

cease & desist, removal/prohibition/suspension, civil

money penalties)

12 U.S.C.§1831o (prompt corrective action)

12 U.S.C.§1831p-1 (safety & soundness directives)

12 U.S.C.§3907 (capital adequacy) (International

Lending Supervision Act of 1983)

© Venable 2014

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Supervisory Authority

How a bank responds to findings and

recommendations in a report of examination,

Matters Requiring Attention (MRAs) and

Matters Requiring Board Attention (MRBAs),

is a key factor in whether a Federal Banking

Authority (“FBA”) will take an enforcement

action and how severe that action will be.

See OCC PPM 5310-3 at 8 (Sept. 9, 2011).

• Note: an enforcement action may be taken

before an exam is completed.

© Venable 2014

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Informal Actions

“Informal actions are voluntary commitments

made by the Board of Directors/trustees of a

financial institution. They are designed to

correct identified deficiencies and ensure

compliance with federal and state banking

laws and regulations. Informal actions are

neither publicly disclosed nor legally

enforceable.”

FDIC Compliance Manual (June 2009) II-8.1 (emphasis added).

© Venable 2014

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Informal actions generally are utilized for banks with

composite ratings of 3 or worse.

The OCC has instructed its examiners that “use

of an informal enforcement action for a 4-rated

bank, or an action other than a PCA directive or

cease and desist order for a 5-rated bank, must

be specifically approved by the appropriate

senior deputy comptroller for Bank Supervision

Operations.”

See OCC PPM 5310-3 at 8-9 (Sept. 9, 2011).

© Venable 2014

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Board Resolution

Voluntary commitment made by Board of Directors, “directing

the institution’s personnel to take corrective action regarding

specific noted deficiencies.” FDIC Compliance Manual (June

2009) II-8.1.

Utilized “[w]hen a bank’s overall condition is sound, but it is

necessary to obtain written commitments from a bank’s board

of directors to ensure that identified problems and

weaknesses will be corrected. . .” See OCC PPM 5310-3 at 4

(Sept. 9, 2011).

Regulator not a party to resolution.

Generally implemented in banks with composite ratings of 3 or

better. See OCC PPM 5310-3 at 8 (Sept. 9, 2011).

Although not legally enforceable, failure to honor the

resolution could give rise to a formal enforcement action.

© Venable 2014

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Memorandum of Understanding (“MOU”)

Generally used when regulator has “reason to

believe that a Board resolution would not adequately

address the deficiencies noted” during an

examination. FDIC Compliance Manual (June 2009)

II-8.1.

Regulator a party; drafts the agreement.

Requirements often similar to those in C&D.

Failure to comply with MOU can result in formal

enforcement action.

© Venable 2014

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Individual Minimum Capital Ratio (“IMCR”) Requirement

Preceded by a notice of intent to issue an IMCR with

period for bank to respond. IMCR usually issued by

letter to bank board of directors.

Unlike PCA directives, IMCRs are considered

confidential and do not affect a bank’s ability to accept

brokered deposits.

Failure to maintain the ratio established could be

deemed an unsafe or unsound practice and trigger a

formal enforcement action.

© Venable 2014

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Formal Actions

Formal Written Agreement

Cease & Desist (C&D)

Personal Cease and Desist Order (PC&D)

Prompt Corrective Action (PCA)

Safety and Soundness Directive

Termination of FDIC Insurance

Removal/Suspension of Institution Affiliated Party

(IAP)

Civil Money Penalties (CMPs)

© Venable 2014

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“Unlike most informal actions, formal enforcement

actions are authorized by statute (mandated in

some cases), are generally more severe, and are

disclosed to the public. Also, formal actions are

enforceable through the assessment of civil money

penalties and, with the exception of formal

agreements, through the federal court system.”

OCC PPM 5310-3 at 4 (Sept. 9, 2011).

© Venable 2014

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“[T]he presumption for formal action under 12 USC 1818

is particularly strong, regardless of a bank’s composite

CAMELS rating or capital levels, when it is experiencing

significant problems or weaknesses in its systems and

controls; serious insider abuse; substantial violations of

law or serious compliance problems; material

noncompliance with prior commitments to take

corrective action; or failure to maintain satisfactory

books and records or provide examiner access to books

and records.”

OCC PPM 5310-3 at 5 (Sept. 9, 2011).

© Venable 2014

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FDIC: “may initiate informal or formal action when an insured

depository institution is found to be in an unsatisfactory

condition.” FDIC Compliance Manual (June 2009).

FRB: “Generally, the Federal Reserve takes formal

enforcement actions against the above entities for violations

of laws, rules, or regulations, unsafe or unsound practices,

breaches of fiduciary duty, and violations of final orders.”

http://www.federalreserve.gov/apps/enforcementactions/default.aspx

FinCEN: “Under the Bank Secrecy Act (BSA), 31 U.S.C.

5311 et seq., and its implementing regulations at 31 C.F.R.

Chapter X (formerly 31 C.F.R. Part 103), FinCEN may bring

an enforcement action for violations of the reporting,

recordkeeping, or other requirements of the BSA.”

http://www.fincen.gov/news_room/ea/

© Venable 2014

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Cease & Desist - 12 U.S.C. 1818(b)

“Issued to halt violations of law as well as to require affirmative action to

correct any condition resulting from such violations.” FDIC Compliance

Manual (June 2009) II-8.1.

May be issued upon consent by Board (“Consent Order”), or involuntarily, after

service of a Notice of Charges and an administrative hearing resulting in a final

agency Order.

A temporary C&D may be issued “in the most severe situations to halt

particularly egregious practices pending a formal hearing” on a permanent

C&D. FDIC Compliance Manual (June 2009) II-8.1; 12 U.S.C. §1818(c)-(d).

A temporary C&D is subject to review by a U.S. District Court within 10 days of

issuance.

Strong presumption for use of a C&D if institution has a composite rating of 4

or 5.

Formal Written Agreements – similar to Consent Order, but not enforceable in

federal court (and violation is not ground for receivership).

Personal Cease & Desist Orders (PC&Ds) may be issued against an

“institution-affiliated party” as defined by 12 U.S.C. § 1813(u).

© Venable 2014

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Cease & Desist (cont.)

Remedial actions permitted under C&D may

include:

– Restitution

– Restrictions on growth

– Disposal of troubled assets

– Termination of agreements

– Changes to management/employees

– Improvements to asset quality,

management, internal controls and

compliance-related issues

– Improvements regarding liquidity

– Capital directives

© Venable 2014

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Prompt Corrective Action – 12 U.S.C. 1831o

“The purpose of this section is to resolve the problems of insured depository institutions at

the least possible long-term loss to the Deposit Insurance Fund.” 12 U.S.C. § 1831o.

PCA actions are triggered by a bank’s capital category. See 12 U.S.C. § 1831o(b).

• Well-Capitalized (“significantly exceeds the required minimum level for each

relevant capital measure”)

• Adequately Capitalized (“meets the required minimum level for each relevant

capital measure”); a downgrade to Adequately Capitalized triggers restrictions

on a bank’s ability to accept brokered deposits (though that prohibition may be

waived by the FDIC)

• Undercapitalized (“fails to meet the required minimum level for any relevant

capital measure”)

• Significantly Undercapitalized (“significantly below the required minimum level

for any relevant capital measure”)

• Critically Undercapitalized (“fails to meet any level specified under subsection

(c)(3)(A)”)

An FBA can impose “more stringent treatment” (e.g. re-classifying a bank from well-

capitalized to adequately capitalized) if engaging in unsafe or unsound practices or if in an

unsafe or unsound condition. See 12 U.S.C. §1831o(g).

A bank’s failure to improve capital or submit an acceptable capital restoration plan may

lead to receivership.

Strong presumption for use if institution has a composite rating of 4 or 5.

Generally requires disclosure of PCA to shareholders.

© Venable 2014

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Safety & Soundness – 12 U.S.C. 1831p-1 (hybrid informal/formal action)

12 U.S.C. § 1831p-1(a) requires each FBA to prescribe standards relating to internal

controls, loan documentation, credit underwriting, interest rate exposure, asset growth,

compensation, asset quality, earnings, and stock valuation.

If an FBA determines that an institution fails to meet a prescribed standard the regulator shall

require the institution to submit a plan specifying the steps that the institution will take to

correct the deficiency. 12 U.S.C. § 1831p-1(e)(1). This part of the process amounts to an

informal enforcement action.

If the institution fails to submit an acceptable plan, the FBA shall issue an order requiring the

institution to correct the deficiency and may require the institution to take other steps

(including limiting asset growth). 12 U.S.C. § 1831p-1(e)(2). This part of the process is a

formal enforcement action.

– The OCC has commented that “a determination that the bank is not in compliance with

an approved plan should be based on a finding that the bank has failed in a material

respect to implement the plan. This failure must be substantial enough to jeopardize or

preclude achieving the objective of the plan.” OCC PPM 5310-3 at 75 (Sept. 9, 2011).

– The OCC has further commented that the “safety and soundness order process should

generally only be used when the problems or weaknesses are narrow in scope and

correctable” and when the regulator is “confident in the board and management’s

commitment and ability to correct the problems or weaknesses.” Id.

© Venable 2014

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OCC Heightened Standards for Certain Large Banks

Heightened Standards for Large Financial Institutions: On September 2, 2014, the OCC

published final guidelines (“guidelines”) to formalize heightened supervisory expectations for

large national banks, under the OCC’s authority to prescribe safety and soundness

standards in 12 U.S.C. § 1831p-1. 79 Fed. Reg. 4282. The guidelines are available from

the OCC website and are forthcoming in the Federal Register.

Application: The guidelines apply to “Covered Banks”: insured national banks, insured

federal savings associations, and insured federal branches of foreign banks with $50 billion

or more average consolidated assets (the guidelines also apply to an OCC-regulated

institution with less than $50 billion in average total consolidated assets if that institution’s

parent company controls at least one other covered institution). They are immediately

effective for Banks with more than $750 billion in assets and will be phased in over time for

banks between $50 and $750 billion.

Enforcement: If OCC determines that a Covered Bank has not met the requirements

standards, the OCC can request that the Covered Bank submit a compliance plan within 30

days. The OCC may issue a formal order if the Covered Bank does not submit an

acceptable compliance plan or fails to adhere to it. The OCC may also use its authority

under 12 USC 1818 to enforce the guidelines.

© Venable 2014

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OCC Heightened Standards for Certain Large Banks (cont.)

Risk Governance Framework: The guidelines call for Covered Banks -- and their CEOs --

to develop a risk governance framework (“Framework”) to include eight specific risk

categories, as well as third party risk. The risk categories include: credit risk, interest rate

risk, liquidity risk, price risk, operational risk, compliance risk, strategic risk, and reputation

risk. Also, as part of the Framework, Covered Banks must:

– Develop a risk appetite statement

– Develop a risk profile

– Set concentration risk limits

Risk Management Roles: The guidelines establish risk management roles for three

designated bank functions: “front-line” units, an “independent risk management” unit, and

“internal audit.”

– “Front line” unit: A unit that engages in activities designed to generate revenue for a

Covered Bank or its parent, or that provides services or support to the Bank or any unit

covered by the guidelines.

– “Independent risk management” unit: The unit within the Covered Bank charged with

identifying, measuring, monitoring, and controlling aggregate risks

– “Internal Audit”: Internal Audit is responsible for ensuring that a Covered Bank’s

Framework complies with the guidelines and for maintaining a complete and current

inventory of the Covered Bank’s material business, product lines, services, and

functions, and to assess and rate the associated risks.

Strategic Plan: Covered Banks must develop a written strategic plan and explain how the

Framework will address anticipated risks.

© Venable 2014

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OCC Heightened Standards for Certain Large Banks (cont.)

Some Positive Changes in Final Guidelines

– Legal not considered a front-line unit

– Board relieved of “managerial” responsibilities (no longer

required to “ensure”)

Some Concerns Linger

– Not clear that FDIC and Fed are fully on-board or will not

promulgate their own guidelines

– Potential for a “check the box” approach by examiners?

– All risk areas continue to be covered – including

compliance (a new avenue of enforcement for BSA?)

– Will OCC hold the line at $50 billion, or will examiners

begin to expect similar approaches by other large

banks?

© Venable 2014

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Termination of FDI Insurance – 12 U.S.C. 1818(a)

If the FDIC Board finds that an institution is unsafe or unsound, or

that its board of directors is engaging in unsafe or unsound

practices, or has violated any law, order, or agreement, the FDIC

shall:

• notify the institution’s FBA or State banking supervisor (if the

Corporation is the appropriate Federal banking agency) “of the

Board’s determination and the facts and circumstances on

which such determination is based for the purpose of securing

the correction of such practice, condition, or violation.”

• notify the institution of the intention to terminate insurance,

along with a statement of charges, and a hearing date. If, at the

hearing, the FDIC Board finds any “unsafe or unsound practice

or condition” it may issue an order terminating the institution’s

insured status.

© Venable 2014

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Removal/Suspension of Institution Affiliated Party – 12 U.S.C. 1818(e)

Institution Affiliated Party (IAP): generally, “any director, officer,

employee, or controlling stockholder (other than a bank holding

company) of, or agent for, an insured depository institution,” can also

include “any independent contractor (including any attorney, appraiser,

or accountant) who knowingly or recklessly” engages in misconduct.

12 U.S.C. § 1813(u).

The prohibition may apply to specific activities, but more typically bans

the IAP from participating in the affairs of any insured depository

institution or industry.

An IAP may be temporarily suspended pending a hearing on an order

of removal if the “individual’s continued participation poses an

immediate threat to the institution or to the interests of the institution’s

depositors.” FDIC Compliance Manual (June 2009) II-8.1.

An IAP may be suspended when charged with felonies involving

dishonesty or breach of trust. Id.

© Venable 2014

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Removal/Suspension of Institution Affiliated Party for Certain Criminal Offenses – 12 U.S.C. 1818(g)

An IAP may be suspended when subject to any information,

indictment, or complaint, involving the commission of or participation

in—

– (i) a crime involving dishonesty or breach of trust which is

punishable by imprisonment for a term exceeding one year under

State or Federal law, or

– (ii) a criminal violation of section 1956, 1957, or 1960 of title 18 or

section 5322 or 5324 of title 31, and

– If, the appropriate Federal banking agency determines that

continued service by such party posed, poses, or may pose a

threat to the interests of the depositors of, or threatens, or may

threaten to impair public confidence in the depository institution.

An IAP may also be permanently removed on the same grounds as

above upon judgment of conviction or an agreement to enter a pretrial

diversion or other similar program at such time as the judgment is not

subject to further appellate review.

© Venable 2014

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Civil Money Penalties 12 U.S.C. 1818(i)

Violation of a law, rule, regulation, or a final Order may result

in the imposition of CMPs. In certain circumstances, CMPs

may be imposed as a result of a breach of fiduciary duty or

unsafe or unsound banking practice.

“Assessed to sanction an institution or IAP according to the

degree of culpability and severity of the violation, breach,

and/or practice and also to deter future occurrences.” FDIC

Compliance Manual (June 2009) II-8.1.

Amounts (Electronic Code of Fed. Regs.; Current as of Feb.

3, 2012) – 12 U.S.C. § 1818(i)(2)(A) Violation of Law or Unsafe or Unsound Practice—1st Tier $7,500

– 12 U.S.C. § 1818(i)(2)(B) Violation of Law or Unsafe or Unsound Practice—2nd Tier $37,500

– 12 U.S.C. § 1818(i)(2)(C) Violation of Law or Unsafe or Unsound Practice—3rd Tier

$1,375,000

© Venable 2014

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Civil Money Penalties 12 U.S.C. 1818(i) (cont.)

Interagency Policy Regarding the Assessment of Civil Money

Penalties by the Federal Financial Institutions Regulatory Agencies

(63 Fed. Reg. 30227, June 3, 1998) provides guidance on the criteria used

by the FBAs. Relevant factors include:

• Whether the violation was intentional

• Duration of the violation, history of prior violations, previous

criticism

• Failure to cooperate with regulator

• Concealment of violation

• Actual loss or threat of loss to institution

• Financial gain by participant

• Lack of compliance program

© Venable 2014

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BSA-Related Enforcement Actions

May take the form of Consent Orders, CMPs or both

– C&D Orders are required in the case of Program Violations (i.e., failure to

establish or implement any of the required components of a BSA Program)

– Such Orders frequently include “Look Back” provisions requiring review of

past transactions and the filing of SARs

FinCEN has separate authority to assess CMPs for BSA-related violations.

See 31 U.S.C. § 5321 & 31 C.F.R., Chapter X.

– FinCEN BSA related enforcement actions can be found at

http://www.fincen.gov/news_room/ea/

Not unusual for CMPs to be assessed concurrently by federal banking agency

and FinCEN.

If criminal money laundering is implicated, Department of Justice may also

participate – generally by means of a deferred prosecution agreement.

State actions may also be possible. In 2012, New York’s Department of

Financial Services (NYDSF) joined with the NY Fed in assessing $340 million in

BSA-related penalties against Standard Chartered Bank. On June 30, 2014,

NYDSF joined other State and Federal authorities in assessing an $8.9 billion

penalty ($2.24 billion constituting a NYDFS civil penalty) against BNP Paribas

(BNPP).

© Venable 2014

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DOJ FIRREA Authority

FIRREA provides that the DOJ may seek civil penalties for violations of 14

different federal criminal laws, including mail and wire fraud statutes (18 U.S.C.

§§ 1341, 1343). Certain violations, such as mail and wire fraud, must affect

federally insured financial institutions. See 12 U.S.C. §1833a.

Under FIRREA, the DOJ need only prove that there was a violation of one of

these 14 predicate criminal offenses “by a preponderance of the evidence,”

which is a civil evidentiary burden. 12 U.S.C. § 1833a(f).

The scope of FIRREA is broad and growing. Courts have recently held that a

financial institution can subject itself to FIRREA penalties through its own

misconduct:

– United States v. Countrywide Fin. Corp., 12 CIV. 1422 JSR, 2014 WL 587364

(S.D.N.Y. Feb. 17, 2014)

– United States v. Bank of N.Y. Mellon, 941 F. Supp. 2d 438 (S.D.N.Y. 2013)

– United States v. Wells Fargo Bank, N.A., 972 F. Supp. 2d 593 (S.D.N.Y. 2013)

DOJ FIRREA Authority has also recently been used in a complaint against Four

Oaks Fincorp and Four Oaks Bank and Trust Co. See DOJ Press Release.

– Four Oaks Complaint

– Four Oaks Consent Order

For a full discussion of Section 951, see FIRREA: The DOJ’s Expansive (And

Expensive) Tool of Choice, by Allyson B. Baker & Andrew Olmen.

© Venable 2014

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“Operation Chokepoint”

Operation Chokepoint is an initiative led by DOJ

that is investigating banks’ business with payment

processors, payday lenders, and similar

companies.

The Four Oaks settlement represents

enforcement action arising out of the Operation

Chokepoint investigations.

Recently, the FDIC provided updated guidance

on third-party payment processors (TPPPs), FIL

41-2014. The guidance may indicate a shift in the

FDIC’s approach to insured institutions’

relationships with TPPPs.

© Venable 2014

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Collateral Consequences of an Enforcement Action

Federal bank regulators’ use of the “troubled condition” designation has

consequences outside the traditional formal and informal enforcement

structure.

The troubled condition designation occurs when a bank is poorly rated or

receives an enforcement action.

– See, e.g., 12 C.F.R. § 303.101(c) (FDIC definition); C.F.R. § 5.51(c)(6)

(OCC definition); 12 C.F.R. § 225.71(d) (FRB definition); 12 C.F.R. §

563.555 (OTS definition); 12 C.F.R. § 701.14(b)(3) (NCUA definition).

Consequences may include:

– Restrictions on growth

– Restrictions on brokered deposits

– Requiring new directors and officers be approved by the regulator

– Restrictions on merger activities or other corporate applications

Further, under Dodd Frank, a bank may not convert its charter while under an

enforcement action (including an MOU) without the permission of the regulator.

See Section 612 of Dodd Frank “Restrictions on Conversions of Troubled

Banks;” see also FDIC FIL-50-2012, dated November 26, 2012, on the same

subject.

An adverse rating (3 or worse) also automatically increases FDIC insurance

premiums.

© Venable 2014

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Review of Enforcement Actions

C&D (involuntarily issued after hearing before ALJ and final agency order) is reviewable by

a U.S. Court of Appeals within 30 days of issuance. 12 U.S.C. § 1818(h)(2).

Temporary C&D may be challenged in U.S. District Court within 10 days of issuance. 12

U.S.C. § 1818(c)(2).

Termination of FDI Insurance is reviewable by a U.S. Court of Appeals within 30 days of

order. 12 U.S.C. § 1818(h)(2).

Notice of Suspension or Order of Removal: Within 30 days of notice, IAP may request to

appear before agency “to show that the continued service to or participation in the conduct

of the affairs of the depository institution by such party does not, or is not likely to, pose a

threat to the interests of the bank’s depositors or threaten to impair public confidence in the

depository institution.” 12 U.S.C. § 1818(g)(3).

CMPs: Agency hearing if requested within 20 days after notice of assessment. 12 U.S.C.

§ 1818(i)(2)(H).

PCA: Statute does not specify administrative or judicial review process. However, the

“bank is given an opportunity to respond to the Notice of Intent, explaining why the

proposed directive is not necessary or offering suggested modifications to the proposed

directive.” OCC PPM 5310-3 at 20 (Sept. 9, 2011). Note that some OTS consent PCAs

include a waiver of the bank’s “right to seek judicial review of the PCA Directive, including,

but not limited to, any such right provided by Section 8(h) of FDIA, 12 U.S.C. § 1818(h).”

OTS Order No.: NE-11-22 (July 1, 2011).

© Venable 2014

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2013-2014 Enforcement Actions: OCC

OCC (2013)

– 87 C&Ds

– 12 PC&Ds

– 4 PCAs

– 16 Removal/Prohibition Orders

– 25 Bank CMPS (ranging from $1,540 to $300,000,000)

– 23 IAP CMPS (ranging from $1,500 to $250,000)

OCC (2014, as of September 2)

– 45 C&D-related actions

– 4 PC&Ds

– 2 PCAs

– 12 Removal/Prohibition Orders

– 10 Bank CMPS (ranging from $4,000 to $350,000,000)

– 24 IAP CMPS (ranging from $1,000 to $40,000)

© Venable 2014

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2013-2014 Enforcement Actions: FDIC

FDIC (2013)

– 5 C&D-related actions

– 9 PCAs

– 114 Removal/Prohibition Orders

– 93 CMPS ($1,200 to $500,000)

FDIC (2014, as of September 2)

– 1 C&D-related actions

– 5 PCAs

– 56 Removal/Prohibition Orders

– 34 CMPS (ranging from $1,000 to $485,000)

© Venable 2014

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2013-2014 Enforcement Actions: FRB

FRB (2013)

– 6 C&Ds (88 Written Agreements)

– 0 PCAs

– 0 Prohibition Order

– 11 Bank CMPs (ranging from $975,000 to $165,000,000)

– 0 IAP CMPs

FRB (2014, as of September 2)

– 4 C&Ds (5 Written Agreements)

– 2 PCAs

– 3 Prohibition Order

– 12 Bank CMPs (ranging from $2,710 to $508,000,000)

– 0 IAP CMPs

© Venable 2014

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2013-2014 Enforcement Actions: FinCEN

FinCEN (2013)

– 2 Bank CMPs ($4,100,000 & $37,500,000)

FinCEN (2014, as of September 2)

– 1 Bank CMPs ($4,100,000 & $37,500,000)

© Venable 2014

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Notable 2014 Enforcement Actions

Bank of America Corp. (DOJ, FBI, FDIC, FHA, FHFA, FinCEN,

FRB, HUD, SEC, TARP, State Attorneys General, and U.S.

Attorneys’ Offices)

– $16.65B settlement that resolves federal and state claims

against Bank of America and its former and current subsidiaries

– The settlement includes a $5B penalty under FIRREA – the

largest FIRREA penalty to date

– The settlement stems from civil investigations related (in part)

to BAC’s practices regarding securities, underwriting and

origination of mortgage loans, and representations to federal

officials

Standard Chartered (NYDFS)

– $300M penalty for alleged AML compliance problems

– Additional settlement terms include:

• NYDFS approval for certain new accounts

• Suspend dollar-clearing activity for certain high-risk clients

• Discontinue business relationships with the UAE

Price Waterhouse Cooper (NYDFS)

– 2-year suspension from consulting with financial institutions

regulated by NYDFS due to AML compliance issues © Venable 2014

38

Notable 2014 Enforcement Actions (cont.)

BNP Paribas SA (OFAC, DOJ, DANY, NYDFS)

– $963M settlement for potential liability for apparent violations of

U.S. sanctions regulations

– Combined settlement of $8.9B with State and federal agencies

J.P. Morgan Chase Bank N.A. (FinCEN)

– $461M fine for willfully violating the BSA, for failure to report

suspicious transactions connected with Bernard Madoff

– FinCEN acted in coordination with the U.S. Attorney’s Office for

the Southern District of New York (SDNY) and the OCC.

– Concurrent $350M fine by OCC

– Concurrent $1.7B asset forfeiture to be collected by SDNY.

© Venable 2014

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Notable 2013 Enforcement Actions

Royal Bank of Scotland PLC (FRB, NYDFS, and OFAC)

– $50 million CMP related to “insufficient oversight ” of dollar

clearing practices and economic sanctions programs; Consent

Order also issues

– DFS assessed a concurrent $50 million penalty

– OFAC assessed a concurrent $33 million penalty

TD Bank, N.A. (OCC, FinCEN and SEC)

– Concurrent $37.5 million CMP by OCC and FinCEN, and $15

million fine by SEC for failure to file SARs related to a South-

Florida based Ponzi scheme

Citigroup (FRB)

– Consent Order addressing AML/BSA deficiencies and BSA and

OFAC compliance risk management

– Companion orders issued by OCC for Citibank and by FDIC for

Banamex USA

© Venable 2014

40

Questions and Comments

© Venable 2014

Ronald R. Glancz

Partner, Washington, DC Office

t 202.344.4947 f 202.344.8300

RGlancz@Venable.com

Ralph E. Sharpe

Partner, Washington, DC Office

t 202.344.4344 f 202.344.8300

RESharpe@Venable.com

Peter S. Frechette

Associate, Washington, DC Office

t 202.344.4616 f 202.344.8300

PSFrechette@Venable.com

www.Venable.com

Thomas E. Gilbertsen

Partner, Washington, DC Office

t 202.344.4598 f 202.344.8300

TEGilbertsen@Venable.com

Thomas P. Vartanian, Partner

Dechert

202.261.3439

thomas.vartanian@dechert.com

Richard M. Alexander, Partner

Arnold & Porter

202.942.5728

richard.alexander@aporter.com

Robert H. Ledig, Partner

Dechert

202.261.3454

robert.ledig@dechert.com

Andrew L. Sandler, Chairman & Executive

Partner

Buckley Sandler

202.349.8001

asandler@buckleysandler.com

Ryan T. Scarborough, Partner

Williams & Connolly

202.434.5173

rscarborough@wc.com

See the additional pdf titled “Reference Materials”