UNITED STATES OF AMERICA BEFORE THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D.C.

)
Written VALLEY Agreement By and Between BANK ) 1 ) Docket 1 ; RESERVE BANK OF SAN FRANCISCO ) ) 1 No. Ol-002.WAIRB-SM

INDEPENDENT

El Centro, California and FEDERAL

San Francisco.

Califolmia

WHEREAS. strengthen California

in Irecognition of the common goal of continuing Independent

to improve

and

the inter-nal controls and procedures at thevalley (the “Bank”).

Bank, El Centro. Reserve System, have mutually

a state chartered bank that is a member of the Federal Reserve Bank of San Francisco Agreement (the “Reserve Bank”)

the Bank and the Federal

agreed to enter into this Written

(the “Agreement”);

WHEREAS.

as the result of the identification its policies and procedures

of deficiencies, for compliance

the Bank is taking with thr Cur~wncy

steps to: (1) enhance and improve and Foreign regulations (collectively Transactions Reponing

Act (3 I U.S.C.

53 I I g =.)

and the accoml)ati!fitl~, 103. I I g S.J

issued by [Ix I~!.S. I)epartment

of the ‘ ~wawr~y (3 I C.F.R. l‘

referred IO :L\ the Bank Secrecy Act (the “USA”)), for the identification

as well as customc’ due tiiliFcnce r of suspicio~~s act~viry:

practices and policies and prwxdurcs and

and reporting

(2) ensure full Regulation System

compliance

with 208.62

all applicable and 208.63) ; and

laws and regulations, of the Board

including

the BSA,

and Reserve

H (12 C.F.R.

of Governors

of the Federal

(“ Board

of Governors” )

WHEREAS, directors, a resolution on behalf

on January

8, 2001, the executive of the Bank,

committee

of the board of meeting, adopted of

of the board of directors and directing to compliance Dennis

at a duly

constituted

authorizing

L. Kern to enter into this Agreement

on behalf parties, Act” ) as

the Bank and consenting defined U.S.C. by section IX 13(u)),

by the Bank and its institution-affiliated Deposit provision Insurance Act, as amended

3(u) of the Federal with each and every

(the “ FDI

(12

of this Agreement.

NOW,

THEREFORE,

the Bank and the Reserve

Bank.

agree as follows:

I. indirectly, violate

The Bank,

and any institution-affiliated

party

thereof. thereto

shall not, directly and shall correct 16, 2000.

or

the BSA or any rules or regulations cited in the Report of Examination

issued pursuant of the Bank

all BSA violations

as of October

2. well

To assist the Bank in correcting of policies

any existing and prtrcedurcs

violations dc\igncd

of the BSA,

as

as assist the Bank in the development with report

to ensure future and

compliance accur;neiy

the BSA and the requirement suspicious (a, activity. Within

of the Board 01’ Govct-nors

to itlelltil’ y

among other things: 30 days of this Agrecmcnc, public accounting 111~. Bank 41;dl engage the consulting firm

scrviccs

of a qualified

independent

firm or qualil’ ied

(the “ consultant” ), Bank’ s diligence necessary, current

acceptable internal controls

to the Reserve

Bank,

to conduct to BSA

a full

and complete

review due where

of the

and procedures and reporting

related

compliance,

customer

and the identification new policies

of suspicious

activity

and recommend,

and procedures Within

to be implemented

by the Bank. of the consultant, Bank but prior to an

(b) the commencement engagement

10 days of the engagement

of the review,

the Bank shall submit the scope of the review. within a reasonable

to the Reserve

for approval

letter that delineates will be completed

The engagement

letter shall specify 30 days. In

that the review addition, documents not limited rhe Reserve

time period,

not to exceed shall

the engagement and records to, work Bank

letter shall acknowledge necessary to conduct

that the consultant

have access 10 all including, but to

the review

and that all information related to the review

papers, programs

and procedures

shall be provided

by the consultant

upon request. of the review, a copy of the consultant’ s to the Reserve repon Bank.

Cc) detailing the findings

Upon completion

and conclusions

from the review

shall be provided

3. paragraph designed 2, hereof,

Within

45 days of the completion submit to the Reserve

of the consultant’ s Bank an acceptable including, requirements

report

required

by

the Bank shall wilh

writlen

program to:

to ensure compliance (3)

all provisions

of the BSA, and reporting

bur not limited for cun-ency

the recordkeeping (3 I C1.F.R. 103.22); 111~identification transactions

Il~ansactions

of over $10.000 (bJ

requirements

r~elared 10 the recordkeeping 103.2X): and

and

rcpor’ ing

requit-emenrs

lor cul-rency Cc)

of over

$iO,OOO (31 CF.R. (31 C.F.II. 103.22);

the exemption

proccdut-es

Cd)
and the retention period

the requirements

related

to the nature of records

to be maintained

of such records

(31 C.F.R.

103.38).

4.
paragraph customer 2, hereof,

Within

45 days of the completion IO the Reserve

of the consultant’ s Bank,

repot-t required enhanced ensure the criminal

by

the Bank shall submit program. accurate

an acceptable to reasonably

due diligence and timely,

The program and complete

shall be designed reporting

identification activity

of known

or suspected

against

or involving activity

the Bank reporting

to law enforcement of Regulation

and supervisory H of the Board shall,

authorities

as required (12

by the suspicious C.F.II. 208.62).

provisions

of Governors

The enhanced (a)

customer

due diligence

program

at a minimum,

provide:

For a risk focused (i) identify

assessment

of the customer of customers of their level

base of the Bank to: transactions activities; and do

the categories

whose

not require

monitoring

because of the routine (ii) determine

and usual nature the appropriate

banking

of enhanced

due diligence

necessary heightened

for those categories risk ol’ illicit

of customers

that the Bank has reason to believe the Bank. whose transactions require

pose a

activities

at or through

(b) diligence. procedures to:

For those customers

enhanced

due

6) confirln the identity and business (ii) cuslomcr: and (iii)

determine activities

the appropriate

documentation

necessary

to

of rhc customer; rile normal and expected tranwcti~xls of the

understand

report

Suspicious

actIvitics

in compliance

with

existing

reporting

requirements

set forth

in Regulation

H of the Board

of Governors

(12 C.F.R.

208.62).

5.
paragraph compliance Governors 2, hereof, program, (12 C.F.R.

Within

45 days of the completion to the Reserve

of the consultant’ s Bank an acceptable of Regulation ensure

report

required

by

the Bank shall submit as required 208.63),

enhanced

written

by the applicable designed

provisions

H of the Board of compliance at

to, among other things,

and maintain thereto.

by the Bank with a minimum, shall:

the BSA

and the rules and regulations

issued pursuant

The program,

(a)

establish

a system of internal issued pursuant

controls

to ensure compliance policies

with

the HSA and the rules and regulations to detect and monitor purposes transactions

thereto.

including

and procedures

to ensure that they are not being with all applicable testing

conducted

for illegitimate

and that there is full

compliance provide

laws and regulations; of compliance and reporting are fully with the BSA and

(b) all applicable activity,

for independent

rules and regulations

thereof audits

and the identification are performed of duties.

of suspicious documented, and

and ensure that compliance with the appropriate

frequently.

are conducted

segregation

(c) managetl authority including, by a qualified to oversee without senior

ensure that the Bank’ s officer

BSA compliance

program experience.

is supervised training programs, reporting or and

and

who possesses the appropriate and enhanced customer

the BSA compliance limitation,

due diligence

the idcntibcation author-ities

and timely. of unusual

accu~mt~~ and complete activity

to

I;I\v enlixcement

and supervisory

or suspiciws

or known

suspected applicable

criminal laws,

activity regulations (d)

perpetrated and rules; provide service

against and training

or involving

the Bank

in accordance

with

all

to all appropriate lending

personnel private

(including.

but not

limited banking

to, tellers. officers

customer

representatives, contact policies

officers, conducted

and personal personnel, accurate and

and all other customer and internal

personnel),

by competent to the BSA,

in all aspects of regulatory recordkeeping repotting personnel

and procedures related

related

and form completion activity

requirements

to the BSA

and the identification basis to ensure that all

of suspicious

and update the training

on a regular

have the 1most current

and up to date information.

6. September written provision

Within

45 days after the end of each calendar 31) following

quarter

(March

3 1, June 30, shall submit with each a

30 and December report

the date of this Agreement, the actions

the Bank

progress

to the Reserve

Bank detailing

taken to comply

of this Agreement Bank.

and the results

of those actions.

Such reports making further

may be discontinued reports.

when the Reserve

in writing,

releases the Bank from

7. paragraphs periods programs comply approved Bank.

The Bank

shall submit

the engagement

letter

and programs Bank within

required the time

by

2(b). -3, 4 and 5 hereof in thih .A;reement.

that are acceptable

to the Reserve

set forth

The Bank shall adopt the engagemeni Bank wiihin IO days of approval lhc Bank shall

letter and the and then shall fully the

that arc approwxl with them During

by the Rescrw

the term of this Agreement. without

not amend or rescind ol’ the Reset-vr

engagemenl

lcrl~‘ and programs r

the pr-iot- written

appl-oval

-6

8.

All (a)

communications Mr. Philip Director Federal

regarding Ryan

this Agreement

shall be sent to:

Reserve

Bank of San Francisco California 94105

IO 1 Market

Street

San Francisco, Mr. William Executive Valley

F. Henle Vice. President Bank 92243-995 I Street

Independent California

1498 W. Main El Centro,

9. of its institution-affiliated

The pt-ovisions parties

of this Agreement

shall be binding

on the Bank and each and assigns.

in their capacities

as such, and their

successors

10.
until stayed, modified,

Each provision terminated,

of this Agreement

shall remain Bank.

effective

and enforceable

or suspended

by the Reserve

Il. Reserve with Bank

Notwithstanding

any provision grant written

of this Agreement extensions

to the contrary,

the

may. in its sole discretion, of Ihi% Agreement.

of time to the Bank to comply

any provision

12.
prevent

The Ipwvisions

of this Agreement

shall not bar, escop. or otherwiw or department. institution-aff‘ iliatcd from Iakin? parties,

the Board of Gc~vc~m)~-s, or any other- federal aflec~ing

or state agrncy or fol-mer

any other action

the Bank, or any of its current

or their succcs’ rors.

01~assign\.

13.

This Agreement is a “written agreement” for the purposes of, and is

enforceable by the Board of Governors as an order issued under, section 8 of the FDI Act (12 U.S.C. 1818).

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of this 81hday of January, 200 I.

Federal Reserve Bank of San Francisco

,,
‘ ~

Mr. Dennis L. Kern President and Chief Executive Officer

By:

-J$$gf+
Director