February 3, 2021

Continuing Bank Secrecy Act issues result in $12.5 million penalty for Apple Bank

On December 21, 2020, the Federal Deposit Insurance Corporation assessed a civil money penalty in the amount of $12,500,000 against Apple Bank for Savings of New York.  The bank consented to issuance of the order without admitting or denying violations of any laws or regulations.  According to the FDIC, Apple Bank failed to comply in timely fashion with the terms of a consent order issued in a 2015 FDIC action, and violated the Bank Secrecy Act, 31 USC § 5311 et seq., 12 USC § 1829b, 12 USC §§ 1951–1959 and 12 USC § 1818(s), and its implementing regulations, 31 CFR chapter X, 12 CFR § 326.8 and 12 CFR part 353.  In assessing the penalty, the FDIC took into account the previous consent agreement, the gravity of the violations, and the bank’s history of previous violations.

The FDIC’s December 2015 consent order issued in the matter of Apple Bank stemmed from perceived weaknesses in the bank’s anti-money laundering compliance program and compliance with the BSA.  The consent order required the bank to develop a written plan to provide for ongoing board oversight of the BSA/AML compliance program, including ongoing effective BSA/AML and OFAC sanctions control and oversight, clearly defined roles and accountabilities to carry out such oversight, training and annual training reviews, and the retention of qualified personnel to ensure compliance.  Furthermore, the consent order imposed a review and enhanced risk assessment of the bank’s operations, and the development of a system of internal controls designed to reasonably ensure fully compliance with the BSA, taking into consideration the bank’s size and risk profile and incorporating policies and procedures that address suspicious activity monitoring and reporting and customer due diligence, and resulting in a remediation plan detailing the steps taken by the bank to address the customer due diligence and enhanced due diligence deficiencies identified in the FDIC’s Target Examination findings of April 6, 2016.

Under the consent order, Apple Bank was also required to engage a qualified firm to perform a validation of the bank’s suspicious activity monitoring system, and a qualified regional director to conduct a review of all accounts and transaction activity for the period of October 2014 until December 2015.  The consent order also required regular progress reports from the regional director.

The FDIC’s announcement of the civil money penalty in January 2021 did not provide details of Apple Bank’s failure to satisfy the terms of the 2015 consent order, other than to point to the bank’s failure to comply with the requirements of the consent order “in a timely manner.”  The consent order terminated on May 29, 2020.

FDIC Order to Pay (2020)FDIC Consent Order (2015)