The Federal Reserve came down on a Kansas community bank for the
The Fed issued a cease and desist order against Lenexa-based Small Business Bank this week citing “new and continuing” issues related to the Bank Secrecy Act and anti-money laundering, or BSA/AML compliance.
Small Business Bank has been in the Fed’s crosshairs since Oct. 31, 2022, when examiners first flagged the $100 million asset institution for BSA/AML compliance issues. The matter was elevated last September when the central bank issued a cease-and-desist order against the bank, citing a range of shortcomings.
In its latest public enforcement action, the Fed zeroed in on money laundering issues. The order did not identify specific violations at the bank, but notes that state and federal supervisors documented the issues during their most recent inspection in May.
The order calls for Small Business Bank to address its BSA/AML compliance, customer identification, customer due diligence, suspicious activity monitoring and reporting, and various transaction oversight programs. The bank has 60 days to put together plans for addressing the various issues raised by the Fed.
Because the bank entered a consent agreement with the Fed and its state supervisor, the Office of the State Bank Commissioner of Kansas, it waived its ability to challenge their findings or the obligations related to the order.
As a result of its initial enforcement action, Small Business Bank and its holding company, Gardner Bancshares, Inc., are prohibited from declaring or issuing dividends without first getting written consent from their regulators.
The original enforcement action also cited the bank for failing to sufficiently manage risks related to credit, interest rates and third-party arrangements. It also raised concerns about lending and credit administration, funding and liquidity, earnings and overall operations.
Small Business Bank specializes in serving small and “micro” businesses, as well as offering checking and high-yield savings accounts and business debit cards.