OCC Imposes $65 Million Penalty on City National Bank for Systemic Deficiencies

The OCC has announced a hefty $65 million civil money penalty against City National Bank, situated in Los Angeles, California. This penalty stems from the OCC's identification of systemic deficiencies in the bank's risk management and internal controls, categorizing the bank's practices as unsafe or unsound.

The examination revealed the bank's failure to establish effective risk management and internal controls, leading to noncompliance with OCC Guidelines Establishing Heightened Standards for Certain Large Insured National Banks. Furthermore, City National Bank found itself in violation of the Bank Secrecy Act (BSA) and 12 CFR Part 9 governing fiduciary activities of national banks.

In response to these findings, the OCC issued a cease-and-desist order mandating the bank to implement comprehensive corrective actions. The outlined corrective measures encompass improving strategic planning, operational risk management (including internal controls), compliance risk management (covering BSA/anti-money laundering and fair lending), strategic risk management, and investment management practices.

Additionally, the OCC had previously entered into an agreement with City National Bank, necessitating actions to comply with the Gramm-Leach-Bliley Act (GLBA) and its implementing regulation. The GLBA compliance requirements apply specifically to national banks that have established or maintained financial subsidiaries.

The financial penalty imposed by the OCC will be directed towards the U.S. Treasury. This enforcement underscores the OCC's commitment to upholding robust risk management and regulatory compliance standards within the banking sector, emphasizing the significance of proactive measures to ensure financial institutions operate safely and soundly.

Recent Surge in Bank Secrecy Act Enforcement Actions

This penalty against City National Bank follows a recent string of Bank Secrecy Act (BSA) enforcement actions. MGM Grand and the Cosmopolitan in Las Vegas faced fines amounting to $7.45 million for BSA violations. Similarly, a New York man recently pleaded guilty to BSA violations in connection with a $1 billion scheme, underlining the regulatory scrutiny and consequences faced by entities and individuals failing to comply with BSA requirements. The heightened enforcement signals regulators' determination to ensure financial institutions uphold the highest standards of anti-money laundering and financial crime prevention.

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