Burke & Herbert Bank & Trust must develop new procedures to guard against money laundering under the terms of a consent agreement with the Federal Deposit Insurance Corporation.
The Alexandria-based bank agreed to do so in a 14-page order dated Aug. 21 and released publicly Sept. 26, just as copies of a two-page letter explaining the regulatory action were arriving in shareholders’ mailboxes.
“Following a constructive process of negotiation with the FDIC, the bank has committed to take specific steps to strengthen and enhance its Bank Secrecy Act program,” says the letter from bank CEO Hunt Burke and President and COO Scott McSween. “Whereas we already were engaged intently in such work, we felt it appropriate to agree to this action by the FDIC in order to remain focused on the future of the bank.”
It’s the first time the FDIC has taken such action against the 162-year-old bank, Burke and McSween told me during an interview Sept. 26. They suggested the action comes amid stepped-up FDIC enforcement of the Bank Secrecy Act, which was passed by Congress in 1970. Among other requirements, the law requires banks to report on cash transactions of $10,000 or more.
An FDIC spokesman said the agency has changed its oversight of the law.
There are no civil fines or restrictions on bank activity in the order, which states the bank is not admitting to any unsafe or unsound banking practices or violation of laws.
Burke and McSween said the financial underpinnings and performance of the bank are as strong as ever. They also suggested the enforcement might have resulted from the size of the bank, now about $2.5 billion in assets, or new FDIC personnel conducting a routine examination, which first flagged the issues last summer.
Whether the bank has been exposed to any money laundering remains to be seen. The order requires a review of “all high-risk accounts and high-risk transaction activity” dating back to June 30, 2011. That could include international transactions, which are more common in Greater Washington than many other parts of the nation.
As required by the order, the bank has named its first-ever BSA officer. Amanda Pierson was hired in July after holding a similar post at WashingtonFirst since March 2012, according to her LinkedIn profile. She will report to Jennifer Schmidt, who was hired in June as chief compliance officer as the bank reshuffled some other duties and positions.
Burke & Herbert also is undergoing several technical upgrades to monitor BSA compliance. “Some of the processes we had in place but were manual and required a lot of explaining [to the FDIC bank examiners],” Burke said.
