by Thomas C. Baxter Jr., Michael M. Wiseman, and Jordan M.H. Wish

Court Defers to the FDIC and the Bank Secrecy Act/Anti-Money Laundering Examination Manual in Rejecting a Rare Challenge by a Bank to an Agency-Imposed Cease-and-Desist Order

Summary

On March 12, in California Pacific Bank v. FDIC, the U.S. Court of Appeals for the Ninth Circuit refused to set aside a cease-and-desist order imposed by the Federal Deposit Insurance Corporation (the “FDIC”) on California Pacific Bank (“California Pacific”).[1]  The order requires the bank to comply with, and correct identified violations of, the Bank Secrecy Act (the “BSA”) by improving the bank’s BSA compliance program and Suspicious Activity Report (“SAR”) filing procedures.  In reaching its decision, the court deferred to the Bank Secrecy Act/Anti-Money Laundering Examination Manual, which is published by the Federal Financial Institutions Examination Council (the “FFIEC Manual”),[2] as a definitive statement of the regulatory requirements for satisfying BSA program obligations.  This deference along with an agency-friendly standard of review confirm the broad discretion that the FDIC and other federal banking agencies have in determining violations of the BSA and requiring related remedial actions. Continue reading →