Brighton Bank agrees with the Federal Deposit Insurance Corporation to overhaul its anti-money laundering techniques and practices after a regulatory report last year found the bank violated compliance laws. did.
The FDIC required the community bank, based 30 miles north of Memphis, Tennessee, to take extensive steps to correct violations of the Bank Secrecy Act. [BSA]According to a consent order released Friday. The order, which took effect on November 30, requires Brighton Bank to appoint BSA officers, strengthen information technology audits, and train staff on BSA/AML requirements, among other issues.
This consent order emphasizes the need for stronger information technology controls for bank compliance and cybersecurity. Brighton Bank did not respond to a request for comment.
Michael Dawson, a partner at law firm WilmerHale, said there was an increasing demand for BSA/AML advice from clients.
“This order reflects continued scrutiny of AML compliance programs by all federal banking agencies,” Dawson said. “Another is that this order reflects how important it is that BSA/AML capabilities are supported by strong IT capabilities. Without effective IT capabilities, effective BSA /It’s not really possible to have AML capabilities.”
Dawson, who advises financial and technology clients on regulation, added that federal regulators only take public enforcement actions against banks with systemic problems, not individual violations. Ta.
Dawson said the consent order requires Brighton Bank to improve its BSA/AML-related practices, including establishing a designated BSA/AML team, independent inspections, employee training, and internal controls. . The order also specifically addresses banks’ wire systems, including wire limits, verification processes, and wire insurance. Dana Twomey, head of risk and compliance consulting for financial institutions at West Monroe, said banks need to leverage a number of technology and process controls to ensure wires are properly reviewed before being transferred. He said there is.
The FDIC initially expressed concern about Brighton’s BSA/AML violations in an August 2022 report. Earlier this year, Brighton Bank launched a new website and updated its mobile app. The new site, which includes an educational blog about cybersecurity, says the redesign is more “user-friendly and efficient, and includes added security features to make you safer.” The bank has appointed Shelby Nipple to her BSA board, according to LinkedIn.
Dawson said banks typically make effective use of the time between inspection and publication of orders, a process that typically takes several years.
“When a bank modifies its program in response to a consent order, the fundamental challenge is that it must continue to operate the bank while simultaneously improving its internal controls and processes,” Dawson said. “As the old saying goes, ‘we’re repairing the plane while it’s flying.’ So there are a lot of challenges with resources.”
Dawson added that it’s surprising how much board oversight the FDIC expects from Brighton Bank. However, he added that when financial institutions are undergoing major changes, such as strategic or operational shifts, regulators often expect the board to play a closer role in the bank’s operations.
In 2020, the bank’s parent company, Brighton Bancorp, agreed to sell a controlling interest in the company to a group of investors who were looking to start a community bank in North Carolina. The bank had $42 million in assets, $37 million in deposits and $25 million in loans, according to announcements at the time.
Toomey said based on what he’s seen in the industry, banks aren’t investing as much in compliance as they do in other areas. He added that banks using outdated or inadequate technology are at a compliance disadvantage and need to take a harder look at their systems going forward.
“IT systems are a very important part of how a BSA should operate within a financial institution,” Twomey said. “It’s no surprise that they’re now under intense scrutiny from regulators.”