Exhibit 99.2
UNITED STATES OF AMERICA
BEFORE
THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
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Written Agreement by and between )
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COUNTY BANK )
Merced, California ) Docket No. 04-025-WA/XX-XX
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and )
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FEDERAL RESERVE BANK OF )
SAN FRANCISCO )
San Francisco, California )
)
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WHEREAS, County Bank, Merced, California (the "Bank"), a state chartered
bank that is a member of the Federal Reserve System, is taking steps to address
deficiencies identified by the Federal Reserve Bank of San Francisco (the
"Reserve Bank") relating to compliance with applicable federal laws, rules, and
regulations relating to anti-money laundering ("AML") policies and procedures,
including the Currency and Foreign Transactions Reporting Act, 31 U.S.C. 5311 et
seq. (the Bank Secrecy Act (the "BSA")); the rules and regulations issued
thereunder by the U.S. Department of the Treasury (31 C.F.R. Part 103); and the
AML provisions of Regulation H (12 C.F.R. 208.62 and 208.63) of the Board of
Governors of the Federal Reserve System (the "Board of Governors");
WHEREAS, in furtherance of their common goal to ensure that the Bank
continues to address identified deficiencies, the Bank and the Reserve Bank have
mutually agreed to enter into this Written Agreement (the "Agreement"); and
WHEREAS, on __________________________, 2004, the Bank's board of
directors, at a duly constituted meeting, adopted a resolution authorizing and
directing
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______________________________ to enter into this Agreement on behalf of the
Bank, and consenting to compliance by the Bank and its institution-affiliated
parties, as defined in section 3(u) of the Federal Deposit Insurance Act, as
amended (the "FDI Act") (12 U.S.C. 1813(u)), with each and every provision of
this Agreement.
NOW, THEREFORE, the Bank and the Reserve Bank agree as follows: Bank
Secrecy Act and Regulation H Compliance
1. Within 60 days of this Agreement, the Bank shall submit to the Reserve
Bank an acceptable written program designed to improve the Bank's system of
internal controls to ensure compliance with all applicable provisions of the BSA
and the rules and regulations issued thereunder, as required by section 208.63
of Regulation H of the Board of Governors (12 C.F.R. 208.63). The program shall
include procedures to identify and incorporate, on an ongoing basis, the
requirements of any amendments to the BSA or the rules and regulations issued
thereunder. The program, at a minimum, shall provide for:
(a) Adequate internal controls to ensure compliance with the BSA and
the rules and regulations issued thereunder, including but not limited to:
(i) the recordkeeping and reporting requirements for
currency transactions over $10,000 (31 C.F.R. 103.22),
including information systems adequate to ensure
accurate and timely form completion and a system capable
of aggregating multiple cash transactions for
appropriate business periods and across business lines
and products and identifying any cash transactions,
including deposits, withdrawals, exchanges, funds
transfers, and purchase of monetary instruments, that
may have been structured to avoid currency transaction
reporting requirements; and
(ii) currency transaction reporting exemption procedures (31
C.F.R. 103.22); and
(b) independent review of compliance with the BSA and the rules and
regulations issued thereunder and procedures to ensure that compliance audits
are comprehensive
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and commensurate with the institution's size and risk profile, including but not
limited to testing of the automated large currency transaction identification
system.
2. The Bank shall take steps to dedicate adequate resources to maintain an
effective BSA compliance program which is commensurate with the institution's
size and risk profile.
Suspicious Activity and Customer Due Diligence
3. Within 60 days of this Agreement, the Bank shall submit to the Reserve
Bank an acceptable enhanced written customer due diligence program designed to
reasonably ensure the identification and timely, accurate, and complete
reporting of all known or suspected violations of law and suspicious
transactions against or involving the Bank to law enforcement and supervisory
authorities, as required by the suspicious activity reporting provisions of
Regulation H of the Board of Governors (12 C.F.R. 208.62). At a minimum, the
program shall include:
(a) A risk-focused assessment of the Bank's customer base to:
(i) identify and document the categories of customers whose
transactions and banking activities are routine and
usual; 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; and
(b) for those customers whose transactions require enhanced due
diligence, additional procedures to:
(i) determine the appropriate documentation necessary to
confirm the business activities of the customer; and
(ii) understand the normal and expected transactions of the
customer; and
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(c) procedures designed to ensure proper identification and reporting of
all known or suspected violations of law and suspicious transactions, including
but not limited to appropriate account and transaction monitoring and risk
assessments.
Audit and Internal Controls
4. Within 60 days of this Agreement, the Bank shall submit to the Reserve
Bank acceptable enhanced written policies and procedures designed to strengthen
the Bank's internal controls and audit program. The policies and procedures, at
a minimum, shall provide for corrective steps to address criticisms set forth in
the Report of Examination for the examination that started on May 17, 2004,
including, but not limited to:
(a) The timely resolution of audit and examination findings and
specific policies and procedures for addressing unresolved findings, including
escalating issues to senior management;
(b) strengthened board oversight of the outsourced audit function
consistent with the Interagency Policy Statement on the Internal Audit Function
and Its Outsourcing, issued March 17, 2003;
(c) a formal, written audit policy designed to provide appropriate
and consistent guidance for the internal audit function;
(d) enhanced internal controls to improve the monitoring of
operations, including but not limited to formal procedures for the use and
reconcilement of suspense and bank controlled accounts; and
(e) a requirement that the policies and procedures be reviewed at
least annually.
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Approval of Programs and Plan
5. The written programs, policies, and procedures required by paragraphs
1, 3, and 4 of this Agreement shall be submitted to the Reserve Bank for review
and approval. Acceptable programs, policies, and procedures shall be submitted
within the time periods set forth in this Agreement. The Bank shall adopt the
approved programs, policies, and procedures within 10 days of approval by the
Reserve Bank and then shall fully comply with them. During the term of this
Agreement, the Bank shall not amend or rescind the approved programs, policies,
or procedures without the prior written approval of the Reserve Bank.
6. Within 30 days after the end of each calendar quarter (December 31,
March 31, June 30, and September 30) following the date of this Agreement, the
board of directors of the Bank shall submit to the Reserve Bank written progress
reports detailing the form and manner of all actions taken to secure compliance
with this Agreement and the results thereof. Such reports may be discontinued
when the corrections required by this Agreement have been accomplished and the
Reserve Bank has, in writing, released the Bank from making further reports.
Communications
7. All communications regarding this Agreement shall be sent to:
(a) Mr. Xxxxxx Xxxx
Director, Banking Applications and Enforcement
Federal Reserve Bank of San Francisco
000 Xxxxxx Xxxxxx, Xxxx Xxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
(b) Xx. Xxxxxx X. Xxxxxx
President and Chief Executive Officer
County Bank
000 Xxxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
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Miscellaneous
8. Notwithstanding any provision of this Agreement to the contrary, the
Reserve Bank may, in its sole discretion, grant written extensions of time to
the Bank to comply with any provision of this Agreement.
9. The provisions of this Agreement shall be binding upon the Bank and all
of its institution-affiliated parties, in their capacities as such, and their
successors and assigns.
10. Each provision of this Agreement shall remain effective and
enforceable until stayed, modified, terminated or suspended by the Reserve Bank.
11. The provisions of this Agreement shall not bar, estop or otherwise
prevent the Board of Governors, the Reserve Bank, or any other federal or state
agency from taking any other action affecting the Bank or any of its current or
former institution-affiliated parties and their successors and assigns.
12. 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 have caused this
Agreement to be executed as of the ____ day of ___________________, 2004.
County Bank Federal Reserve Bank of San Francisco
By: _________________________________ By: _________________________________
Xxxxxx X. Xxxxxx Xxxxxx Xxxx
President and CEO Director, Banking Applications
and Enforcement
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