Federal Reserve Board issues enforcement action with U & I Financial Corp. and UniBank
On August 25, 2023, the Federal Reserve Board announced that it had issued an enforcement action against U & I Financial Corp. (U & I) and its subsidiary, UniBank (collectively, the “Company”). The action was taken in response to the Company’s unsafe and unsound banking practices and violations of law.
The Federal Reserve’s investigation found that the Company engaged in a number of unsafe and unsound banking practices, including:
- Making excessive and risky loans to insiders and other related parties
- Failing to adequately underwrite loans and monitor borrowers
- Concentrating its loan portfolio in a small number of industries and geographic areas
- Failing to maintain adequate capital and liquidity levels
The investigation also found that the Company violated a number of laws, including:
- The Bank Secrecy Act (BSA)
- The Anti-Money Laundering (AML) Act
- The Truth in Lending Act (TILA)
- The Real Estate Settlement Procedures Act (RESPA)
As a result of the enforcement action, the Company has agreed to a number of remedial measures, including:
- Hiring an independent consultant to review its lending practices and BSA/AML compliance program
- Developing and implementing a plan to improve its capital and liquidity levels
- Paying a civil penalty of $10 million
The Federal Reserve’s enforcement action against the Company is a reminder that banks must operate in a safe and sound manner and comply with all applicable laws. The action also demonstrates the Federal Reserve’s commitment to protecting consumers and the financial system.
In depth explanation
The Federal Reserve Board is the central bank of the United States. It is responsible for regulating the nation’s financial system and ensuring its stability. The Federal Reserve has a number of tools at its disposal to enforce its regulations, including enforcement actions.
Enforcement actions can be used to address a variety of violations, including unsafe and unsound banking practices and violations of law. The Federal Reserve can issue enforcement actions against banks, their holding companies, and their directors and officers.
Enforcement actions can take a variety of forms, including:
- Cease-and-desist orders
- Removal or prohibition orders
- Civil money penalties
- Criminal referrals
The Federal Reserve’s enforcement action against the Company is a significant development. It is the first time that the Federal Reserve has issued an enforcement action against a bank for violating the BSA/AML Act. The action is a reminder that banks must take their BSA/AML compliance obligations seriously.
The Federal Reserve’s enforcement action against the Company is also a reminder that banks must operate in a safe and sound manner. The action demonstrates the Federal Reserve’s commitment to protecting consumers and the financial system.
Federal Reserve Board issues enforcement action with U & I Financial Corp. and UniBank
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