The Federal Reserve issued another cease-and-desist order against Lenexa, Kansas-based Small Business Bank after a May examination by the Federal Reserve Bank of Kansas City and the Office of the State Bank Commissioner of Kansas found “new and continuing deficiencies” in the bank’s operations.
The examination found shortcomings in the state-chartered bank’s risk management and issues with the lender’s anti-money laundering and Bank Secrecy Act compliance.
The order follows one the central bank issued in September 2023 against Small Business Bank and its holding company, Gardner Bancshares, wherein the Fed cited deficiencies in risk management, compliance with AML regulations, and a list of operational shortcomings based on an October 2022 exam.
The Fed ordered the bank to submit a plan within 60 days to improve its BSA/AML compliance program, addressing adequate board resources for compliance, clearly defined management roles and accountability, management of the bank’s BSA/AML program by a qualified compliance officer with necessary resources, comprehensive BSA/AML risk assessment methodology and improved independent testing with board review and documentation.
The bank also must submit a plan within 60 days to improve its customer due diligence and identification programs, to incorporate risk-based policies, procedures and controls.
Also, the bank must submit a program ensuring that it identifies and timely and accurately reports to law enforcement and supervisory authorities any suspicious transactions or known or suspected violations of law.
Within 90 days, the bank must engage an independent third-party consultant to review its BSA/AML transaction monitoring system and prepare a report addressing the technological resources needed, adequacy of filtering criteria and system configurations, and testing of system information capture.
The bank also needs to submit interim monitoring procedures for wire and Automated Clearing House transactions.
Small Business Bank’s board must also submit quarterly progress reports to the Fed within 30 days after the end of each quarter.
The lender is also barred from paying dividends without approval from the Fed, the Kansas City Fed, and the state regulator.
The community bank specializes in serving small and micro business owners across the U.S., offering them mobile banking and card products, according to its website.
Small Business Bank has waived its ability to challenge the findings of the central bank and its state supervisor since it has entered into a consent order with the regulators.
