The Federal Reserve has issued yet another cease-and-desist order against Small Business Bank, based in Lenexa, Kansas. This action follows a thorough examination conducted in May by the Federal Reserve Bank of Kansas City and the Office of the State Bank Commissioner of Kansas, which revealed both new and ongoing deficiencies in the bank’s operations.
The state-chartered bank’s risk management was found to have shortcomings, along with issues regarding the lender’s compliance with anti-money laundering and Bank Secrecy Act.
The Federal Reserve has issued an order against Small Business Bank and its holding company, Gardner Bancshares, in September 2023. This action was taken after the Fed identified deficiencies in risk management, compliance with AML regulations, and a list of operational shortcomings during an October 2022 exam.
The Federal Reserve has instructed the bank to develop a plan within 60 days to enhance its BSA/AML compliance program. This plan should include provisions for allocating sufficient board resources for compliance, clearly defining management roles and responsibilities, ensuring the bank’s BSA/AML program is overseen by a qualified compliance officer with adequate resources, implementing a comprehensive BSA/AML risk assessment methodology, and enhancing independent testing with board review and documentation.
The bank is required to submit a plan within 60 days to enhance its customer due diligence and identification programs. The plan should include risk-based policies, procedures, and controls.
The bank is required to develop and implement a program that guarantees the identification and prompt reporting of any suspicious transactions or known or suspected violations of the law to law enforcement and supervisory authorities.
The bank is required to enlist the services of an independent third-party consultant within a period of 90 days. This consultant will be responsible for conducting a thorough review of the bank’s BSA/AML transaction monitoring system. The consultant will then prepare a comprehensive report that will cover various aspects including the evaluation of technological resources required, the adequacy of filtering criteria and system configurations, as well as the testing of system information capture.
The bank is required to provide interim monitoring procedures for wire and Automated Clearing House transactions.
The board of Small Business Bank is required to submit quarterly progress reports to the Fed within 30 days after the end of each quarter.
The lender cannot pay dividends without obtaining approval from the Fed, the Kansas City Fed, and the state regulator.
The community bank has a specialized focus on catering to small and micro business owners throughout the United States. Their website states that they provide mobile banking and card products to these entrepreneurs.
Small Business Bank has chosen not to contest the findings of the central bank and its state supervisor, as it has entered into a consent order with the regulators.
