EXHIBIT 99.1
UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
__________________________________
)
Written Agreement by and between )
)
UNION BANK OF CALIFORNIA )
INTERNATIONAL ) Docket No. 04-028-WA/XX-XX
New York, New York )
)
FEDERAL RESERVE BANK OF NEW YORK )
New York, New York )
)
__________________________________)
WHEREAS, Union Bank of California International, New York, New York
("UBOCI"), an Edge corporation organized under Section 25A of the Federal
Reserve Act (12 U.S.C. 611 et seq.) that is a subsidiary of Union Bank of
California, N.A., San Francisco, California, is taking steps to address
deficiencies relating to compliance with applicable federal and state anti-money
laundering ("AML") laws, rules, and regulations, including the Currency and
Foreign Transactions Reporting Act, 31 U.S.C. 5311 et seq. (the Bank Secrecy Act
or the "BSA"), as amended by the USA PATRIOT Act; the rules and regulations
issued thereunder by the U.S. Department of the Treasury (31 C.F.R. Part 103);
and the suspicious activity reporting requirements of Regulation K of the Board
of Governors of the Federal Reserve System (the "Board of Governors") (12 C.F.R.
211.5(k));
WHEREAS, UBOCI provides significant services to its correspondent
banking customers, including non-U.S. banks, and also conducts a high volume of
U.S. dollar clearing business, and Federal Reserve Bank of New York (the
"Reserve Bank") examiners have identified compliance and risk management
deficiencies at UBOCI in these operational areas;
WHEREAS, UBOCI is taking steps to enhance due diligence policies and
procedures relating to its funds transfer clearing operations and correspondent
accounts for non-U.S. banks and is addressing risks associated with these lines
of business, including legal and reputational risks, by implementing industry
sound practices designed to identify and effectively manage such risks;
WHEREAS, it is the common goal of UBOCI and the Reserve Bank to ensure
that UBOCI fully addresses all deficiencies in UBOCI's AML policies and
procedures, customer due diligence practices, risk management processes, and
internal control environment; and
WHEREAS, on October 18, 2004, the board of directors of UBOCI, at a
duly constituted meeting, adopted a resolution authorizing and directing Xxxxx
X. Xxxxxx, Xx.., President of UBOCI, to enter into this Written Agreement (the
"Agreement") on behalf of UBOCI and consenting to compliance by UBOCI and its
institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the
Federal Deposit Insurance Act, as amended (12 U.S.C. 1813(u) and 1818(b)(3)),
with each and every provision of this Agreement.
NOW, THEREFORE, UBOCI and the Reserve Bank hereby agree as follows:
ANTI-MONEY LAUNDERING COMPLIANCE
1. Within 60 days of this Agreement, UBOCI shall submit to the Reserve
Bank an acceptable written AML program designed to improve UBOCI's system of
internal controls and to ensure compliance with all applicable provisions of the
BSA and the rules and regulations issued thereunder. The program shall include
provisions for updates on an ongoing basis as necessary to incorporate
amendments to the BSA and the rules and regulations issued thereunder. The
program shall, at a minimum:
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(a) Improve UBOCI's system of internal controls, particularly in
the area of funds transfer clearing operations, to ensure compliance with all
recordkeeping and reporting requirements;
(b) include controls designed to ensure compliance with all
requirements relating to correspondent accounts for non-U.S. persons, including
but not limited to the prohibition on correspondent accounts for foreign shell
banks (31 C.F.R. 103.177) and due diligence requirements for certain
correspondent accounts (31 C.F.R. 103.181);
(c) provide for thorough assessment of legal and reputational
risks associated with correspondent accounts and clearing operations and for
regular review of risk tolerance by appropriate members of senior management;
(d) provide for the retention of outside consultant assistance as
necessary and appropriate to assess risks associated with particular lines of
business and to design and implement controls to manage such risks; and
(e) be designed to ensure identification and verification of the
identity of account holders and transactors in accordance with applicable
regulations.
INDEPENDENT TESTING AND AUDIT
2. Within 60 days of this Agreement, UBOCI shall submit to the Reserve
Bank an acceptable written plan for enhancing independent testing of UBOCI's AML
compliance. The plan shall include, at a minimum:
(a) Procedures to evaluate UBOCI's compliance with the BSA, the
rules and regulations issued thereunder, and all other applicable AML and
suspicious activity reporting requirements;
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(b) procedures to evaluate UBOCI's adherence to industry sound
practices relating to AML compliance, customer and correspondent account due
diligence, and the reporting of suspicious activities;
(c) procedures for ongoing compliance monitoring covering
operations and customer due diligence in the funds transfer and correspondent
banking lines of business, including a schedule of compliance reviews to be
performed in those areas;
(d) regular evaluation of training to ensure that appropriate
personnel possess the requisite knowledge necessary to comply with the BSA;
(e) provisions for independent testing to be performed by
qualified parties (which may include internal audit) who are independent of
UBOCI's business lines and compliance function;
(f) procedures for review of independent testing results by senior
management and escalation to the board of directors in appropriate
circumstances;
(g) procedures to ensure that senior management institutes
appropriate actions in response to the independent testing results; and
(h) procedures to ensure that independent testing results are
communicated to the Reserve Bank on a regular basis and retained for subsequent
supervisory review. TRAINING
3. Within 60 days of this Agreement, UBOCI shall submit to the Reserve
Bank an acceptable written plan to provide documented, effective training to all
appropriate personnel at UBOCI (including, but not limited to, correspondent
account relationship personnel, employees involved in funds transfer clearing
operations, and customer contact personnel) in all aspects of regulatory and
internal policies and procedures related to the BSA and the identification and
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reporting of suspicious transactions, and to update the training on a regular
basis to reasonably ensure that all personnel are trained in the most current
legal requirements and in the organization's risk management processes.
SUSPICIOUS ACTIVITY REPORTING AND CUSTOMER DUE DILIGENCE
4. Within 60 days of this Agreement, UBOCI shall submit to the Reserve
Bank an acceptable 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 against or involving UBOCI and all
suspicious transactions at UBOCI to law enforcement and supervisory authorities
as required by the suspicious activity reporting provisions of the Board of
Governors (12 C.F.R. 211.5(k)). At a minimum, the program shall include:
(a) A methodology for assigning risk levels to UBOCI's customer
base, including correspondent accountholders;
(b) a risk focused assessment of UBOCI's customer base to:
(i) identify 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 pose a heightened
risk of conducting potentially illicit activities at or through UBOCI;
(c) for each customer whose transactions require enhanced due
diligence, procedures to:
(i) determine the appropriate documentation necessary to
verify the identity and business activities of the customer;
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(ii) understand the normal and expected transactions of the
customer; and
(iii) periodically review the parameters of normal business
activity for the customer;
(d) for correspondent accounts established, maintained,
administered, or managed in the United States for a foreign financial
institution, procedures that comport with the industry sound practices that are
set forth in available public guidance (e.g., the New York Clearing House
Association LLC's "Guidelines for Counter Money Laundering Policies and
Procedures in Correspondent Banking" (March 2002) and the Basel Committee on
Banking Supervision's "Customer Due Diligence for Banks" (October 2001)), and
that include, but are not limited to:
(i) obtaining appropriate information about the
correspondent, its business operations, its customers, and its AML procedures,
particularly with regard to its customer relationships that may present a
heightened risk of money laundering; and
(ii) procedures to ensure that correspondent banking services
provided by UBOCI are reviewed and approved by appropriate levels of management,
and are subject to appropriate ongoing review; and
(e) procedures designed to ensure proper identification and
reporting of all known or suspected violations of law and suspicious
transactions, including but not limited to:
(i) effective monitoring of customer accounts and
transactions, including transactions conducted through UBOCI's clearing
operations, consistent with industry sound practices;
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(ii) appropriate participation by senior management in the
process of identifying, reviewing, and reporting potentially suspicious
activity; and
(iii) adequate and timely referral of information about
potentially suspicious activity to appropriate levels of management, including a
policy for determining action to be taken in the event of multiple filings of
Suspicious Activity Reports on the same customer or where a correspondent fails
to provide due diligence information in a timely fashion.
TRANSACTION REVIEW
5. (a) Within 20 days of this Agreement, UBOCI shall engage a
qualified independent firm (the "Consultant") acceptable to the Reserve Bank to
conduct a review of account and transaction activity for a time period beginning
no later than July 23, 2002 to the present to determine whether suspicious
activity involving accounts or transactions at, by, or through UBOCI was
properly identified and reported in accordance with applicable suspicious
activity reporting regulations (the "Review").
(b) Within 10 days of the engagement of the Consultant, but prior
to the commencement of the Review, UBOCI shall submit to the Reserve Bank for
approval an engagement letter that sets forth:
(i) The scope of the Review, including the types of accounts
and transactions to be reviewed;
(ii) the methodology for conducting the Review, including any
sampling procedures to be followed;
(iii) the expertise and resources to be dedicated to the
Review; and
(iv) the anticipated date of completion of the Review.
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(c) Upon completion of the Review, UBOCI shall provide to the
Reserve Bank a copy of the Consultant's report detailing the findings of the
Review at the same time the report is provided to UBOCI.
(d) Upon completion of the Review, UBOCI shall ensure that all
matters or transactions required to be reported that have not previously been
reported are reported in accordance with applicable rules and regulations.
APPROVAL AND PROGRESS REPORTS
6. The programs, plans, engagement letter, and the identification of
the independent consultant required by paragraphs 1, 2, 3, 4, and 5 of this
Agreement shall be submitted to the Reserve Bank for review and approval.
Acceptable programs, plans, and an acceptable engagement letter shall be
submitted to the Reserve Bank within the time periods set forth in this
Agreement and an acceptable independent consultant shall be retained within the
time period set forth in paragraph 5(a) of this Agreement. UBOCI shall adopt the
approved programs, plans, and engagement letter within 10 days of approval by
the Reserve Bank and then shall fully comply with them. During the term of this
Agreement, the approved programs, plans, and engagement letter shall not be
amended or rescinded without the prior written approval of the Reserve Bank.
7. Within 20 days after the end of each month following the date of
this Agreement, UBOCI shall submit to the Reserve Bank written progress reports
detailing the form and manner of all actions taken to secure compliance with the
provisions of this Agreement, and the results thereof. Management's responses to
the audit reports on BSA prepared by internal and external auditors shall be
included with the progress report. The Reserve Bank may, in writing, discontinue
the requirement for progress reports or modify the reporting schedule.
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NOTICES
8. All communications regarding this Agreement shall be sent to:
(a) Xx. Xxxxxx X. X'Xxxxxxxx
Xxxxxx Vice President
Federal Reserve Bank of New York
00 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
(b) Xx. Xxxxx X. Xxxxxx, Xx.
President
Union Bank of California International
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
MISCELLANEOUS
9. The provisions of this Agreement shall be binding on UBOCI and each
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 in writing by the
Reserve Bank.
11. Notwithstanding any provision of this Agreement, the Reserve Bank
may, in its sole discretion, grant written extensions of time to UBOCI to comply
with any provision of this Agreement.
12. The provisions of this Agreement shall not bar, estop or otherwise
prevent the Board of Governors, the Reserve Bank, or any federal or state agency
from taking any further or other action affecting UBOCI or any of its current or
former institution-affiliated parties or their successors or assigns.
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
Federal Deposit Insurance Act.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this 18th day of October, 2004.
UNION BANK OF CALIFORNIA FEDERAL RESERVE BANK OF NEW
INTERNATIONAL YORK
By: /s/ By: /s/
____________________ _____________________
Xxxxx X. Xxxxxx, Xx. Xxxxx Xxxxxxxxx
President Senior Vice President
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