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Neighborhood National Bank Beefing Up Compliance Program

San Diego-based Neighborhood National Bank has agreed to beef up its anti-money laundering capabilities, federal regulators said Friday, in a deal that will stave off enforcement proceedings from the Comptroller of the Currency.

NNB signed a consent order on March 24 pledging to develop a more robust risk compliance program to meet its obligations under the Bank Secrecy Act (BSA). It will issue a detailed remediation plan by the end of May to correct any current violations, according to the order.

The bank, founded in 1997, said it has hired a new senior vice president with extensive BSA experience to help formulate the plan. President Dan Yates said regulators are paying increased attention to money laundering concerns and that NNB draws extra scrutiny because its typical clients are businesses in low- to moderate-income areas that deal primarily in cash, a major red flag. NNB is a Community Development Financial Institution, which means it works in underserved areas.

“We are expected to do quite a bit more than a bank that might have one or two (money service business) clients,” Yates said. “It’s about half of our business. We’re investing in additional resources and staffers with deeper investigative skills.”

The latest consent order also peels back a similar 2010 order over the bank’s problem loans and relatively low asset quality. Most of those problems are fixed, according to Yates, who said he was hired about two years ago in part to remove the prior consent order. The new order reiterates NNB’s need to maintain a leverage ratio of at least 9 percent; Yates said the current ratio is around 7.5 percent.

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