UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 4, 2014
FULTON FINANCIAL CORPORATION
(Exact name of Registrant as specified in its Charter)
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Pennsylvania |
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0-10587 |
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23-2195389 |
(State or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification Number) |
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One Penn Square |
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Lancaster, Pennsylvania |
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17604 |
(Address of principal executive offices) |
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(Zip Code) |
Registrants telephone number, including area code: 717-291-2411
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01 Other Events.
On September 4, 2014, Fulton Financial Corporation (the Corporation) and its wholly owned subsidiary, Lafayette Ambassador Bank
(Lafayette), entered into a Cease and Desist Order Issued Upon Consent (the Cease and Desist Order) with the Board of Governors of the Federal Reserve System (the FRB). The Cease and Desist Order relates to
identified deficiencies in a centralized Bank Secrecy Act and anti-money laundering compliance program (the BSA/AML Compliance Program), which was designed to comply with the requirements of the Bank Secrecy Act, the USA Patriot Act of
2001 and related anti-money laundering regulations (collectively, the BSA/AML Requirements). The Corporation operates the BSA/AML Compliance Program for the joint benefit of the Corporation and its subsidiary banks, including Lafayette.
As previously disclosed, on July 14, 2014, three of the Corporations other subsidiaries, Fulton Bank, N.A., Swineford National Bank and FNB
Bank, N.A., each entered into a Stipulation and Consent to the Issuance of a Consent Order with the Office of the Comptroller of the Currency (the OCC), consenting to the issuance by the OCC of a Consent Order (collectively, the
Consent Orders) with respect to BSA/AML Requirements and the Corporations BSA/AML Compliance Program. The Consent Orders and the anticipated issuance of the Cease and Desist Order were described in a Current Report on Form 8-K
filed by the Corporation on July 18, 2014; the disclosure in such prior Current Report is incorporated herein by reference. Because the Cease and Desist Order and the Consent Orders all relate to the BSA/AML Compliance Program which is jointly
operated for all of the Corporations subsidiary banks, one or more of the Corporations other subsidiary banks may also become subject to an enforcement action related to the BSA/AML Requirements, and the provisions of any such
enforcement action may differ from the Cease and Desist Order and the Consent Orders.
The requirements of the Cease and Desist Order are similar to the
requirements of the Consent Orders. In addition, the Cease and Desist Order requires, among other things, that the Corporation engage an independent third-party firm to conduct a comprehensive assessment of the BSA/AML Compliance Program, and that
Lafayette engage an independent third-party firm to conduct a retrospective review of account and transaction activity from January 1, 2014 to June 30, 2014 associated with high-risk customers to determine whether suspicious activity was
properly identified and reported in accordance with the BSA/AML Requirements. Based on the results of this transaction review, the FRB may require a review of transactions for additional time periods.
This Current Report on Form 8-K may contain forward-looking statements with respect to the Corporations financial condition, results of operations and
business. Do not unduly rely on forward-looking statements. Forward-looking statements can be identified by the use of words such as may, should, will, could, estimates,
predicts, potential, continue, anticipates, believes, plans, expects, future, intends and similar expressions which are intended to identify
forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, some of which are beyond the Corporations control and ability to predict, that could cause actual
results to differ materially from those expressed in the forward-looking statements.
The foregoing description of the Cease and Desist Order is qualified
in its entirety by reference to the full text of the Cease and Desist Order, a copy of which is attached as Exhibit 99.1, and incorporated herein by reference.
Item 9.01 Financial Statements And Exhibits.
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Exhibit No. |
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Description |
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99.1 |
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Order to Cease and Desist Issued Upon Consent dated September 4, 2014, by the Board of Governors of the Federal Reserve System to Fulton Financial Corporation and Lafayette Ambassador Bank, Bethlehem, Pennsylvania. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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Date: September 9, 2014 |
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FULTON FINANCIAL CORPORATION |
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By: |
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/s/ Daniel R. Stolzer |
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Daniel R. Stolzer |
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Executive Vice President and General Counsel |
Exhibit 99.1
UNITED STATES OF AMERICA
BEFORE
THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
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In the Matter of |
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Docket Nos. |
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14-023-B-HC |
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14-023-B-SMB |
FULTON FINANCIAL CORPORATION |
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Lancaster, Pennsylvania |
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Cease and Desist Order Issued Upon Consent Pursuant to the Federal Deposit Insurance Act, as amended |
and |
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LAFAYETTE AMBASSADOR BANK |
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Bethlehem, Pennsylvania |
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WHEREAS, Fulton Financial Corporation, Lancaster, Pennsylvania (FFC), a registered bank holding
company, owns and controls Lafayette Ambassador Bank, Bethlehem, Pennsylvania (the Bank), a state-chartered bank that is a member of the Federal Reserve System, five other banks (collectively, the Subsidiary Banks), and
various nonbank subsidiaries;
WHEREAS, FFC has adopted a firmwide compliance program for its Subsidiary Banks, designed to ensure
compliance with all applicable laws, rules, and regulations relating to anti-money laundering (AML), including compliance with the Bank Secrecy Act (BSA) (31 U.S.C. § 5311 et seq.); the rules and regulations
issued thereunder by the U.S. Department of Treasury (31 C.F.R. Chapter X); and the AML regulations issued by the appropriate federal supervisors for FFC and each of the Subsidiary Banks (collectively, BSA/AML Requirements);
WHEREAS, as part of the firmwide compliance program, FFC performs various services for the
Subsidiary Banks regarding compliance with the BSA/AML Requirements, including, but not limited to, monitoring and reporting of suspicious activity, high risk customer identifications, currency transaction reporting and exemptions, training,
policies, procedures, and risk assessments;
WHEREAS, the most recent inspection of FFC conducted by the Federal Reserve Bank of
Philadelphia (the Reserve Bank) identified deficiencies in FFCs firmwide compliance program with respect to compliance with the BSA/AML Requirements;
WHEREAS, the most recent examination of the Bank conducted by the Reserve Bank identified deficiencies in the Banks internal controls,
customer due diligence procedures, and transaction monitoring processes with respect to compliance with the BSA/AML Requirements;
WHEREAS, FFC, the Bank, the Board of Governors, and the Reserve Bank have the common goals that the Bank operates in compliance with all
applicable BSA/AML Requirements, that FFC, on a firmwide basis implements an effective compliance risk management program for BSA/AML compliance that is commensurate with the Subsidiary Banks compliance risk profiles, and that any services
that FFC performs for the Subsidiary Banks regarding compliance with BSA/AML Requirements meet regulatory expectations;
WHEREAS, FFC, the
Bank, and the Board of Governors have mutually agreed to enter into this consent Cease and Desist Order (the Order); and
WHEREAS, on July 15 and 16, 2014, the boards of directors of FFC and the Bank, respectively, adopted resolutions authorizing and
directing E. Philip Wenger and Gerald A. Nau to enter into this Order on behalf of FFC and the Bank, respectively, and consenting to compliance with each and every applicable provision of this Order by FFC and the Bank, and
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waiving any and all rights that FFC and the Bank may have pursuant to section 8 of the Federal Deposit Insurance Act, as amended (the FDI Act) (12 U.S.C. § 1818), including, but
not limited to: (i) the issuance of a notice of charges on any and all matters set forth in this Order; (ii) a hearing for the purpose of taking evidence on any matters set forth in this Order; (iii) judicial review of this Order; and
(iv) challenge or contest, in any manner, the basis, issuance, validity, terms, effectiveness or enforceability of this Order or any provision hereof.
NOW, THEREFORE, it is hereby ordered that, before the filing of any notices, or taking of any testimony or adjudication of or finding on any
issues of fact or law herein, and solely for the purpose of settling this matter without a formal proceeding being filed and without the necessity for protracted or extended hearings or testimony, pursuant to sections 8(b)(1) and (3) of the FDI
Act (12 U.S.C. §§ 1818(b)(1) and 1818(b)(3)), FFC, the Bank, and their institution-affiliated parties, as defined in sections 3(u) and 8(b)(4) of the FDI Act (12 U.S.C. §§ 1813(u) and 1818(b)(4)), shall cease and desist and take
affirmative action as follows:
Source of Strength
1. The board of directors of FFC shall take appropriate steps to fully utilize FFCs financial and managerial resources, pursuant to
section 38A of the FDI Act (12 U.S.C. § 183lo-l) and section 225.4(a) of Regulation Y of the Board of Governors (12 C.F.R. § 225.4(a)), to serve as a source of strength to each of the Subsidiary Banks, including, but not
limited to, taking steps to ensure that the Bank complies with this Order and any other supervisory action taken by the Banks federal or state regulators and that the Subsidiary Banks comply with any supervisory action taken by their
respective federal or state regulators.
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Board Oversight
2. Within 60 days of this Order, FFCs board of directors shall submit to the Reserve Bank a written plan acceptable to the Reserve Bank
to strengthen board oversight of FFCs compliance risk management program with regard to services that FFC performs for the Subsidiary Banks regarding compliance with the BSA/AML Requirements. The plan shall describe the actions that the board
of directors or an officially designated committee thereof will take to improve FFCs compliance risk management with regard to the BSA/AML Requirements. The plan shall, at a minimum, address, consider, and include:
(a) funding for qualified and trained personnel, systems, and other resources needed to operate a compliance risk management program with
regard to the BSA/AML Requirements that is commensurate with the compliance risk profile of the organization and that fully addresses the organizations compliance risks on a timely and effective basis;
(b) measures to ensure adherence to approved compliance policies, procedures and standards; and
(c) steps to improve the information and reports that will be regularly reviewed by the board of directors and its committees in their
oversight of the services that FFC performs for the Subsidiary Banks regarding compliance with the BSA/AML Requirements, including risk assessments, and the status and results of measures taken, or to be taken, by senior officers to remediate
outstanding compliance issues.
BSA/AML Compliance Program Review
3. Within 30 days of this Order, FFC shall retain an independent third party acceptable to the Reserve Bank to : (i) conduct a
comprehensive review of the effectiveness of the BSA/AML compliance program adopted by FFC under which FFC performs services for the
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Subsidiary Banks regarding compliance with the BSA/AML Requirements (the BSA/AML Review) and (ii) prepare a written report of findings, conclusions, and recommendations (the
BSA/AML Report).
4. Within 10 days of the engagement of the
independent third party, but prior to the BSA/AML Review, FFC shall submit to the Reserve Bank for approval an engagement letter that provides, at a minimum, for the independent third party to:
(a) conduct a comprehensive assessment of FFCs BSA/AML compliance program, policies, and procedures;
(b) complete the BSA/AML Review within 60 days of the Reserve Banks approval of the engagement letter;
(c) provide to the Reserve Bank a copy of the BSA/AML Report at the same time that the report is provided to FFC; and
(d) commit that any and all interim reports, drafts, workpapers, or other supporting materials associated with the BSA/AML Review will be made
available to the Reserve Bank upon request.
Firmwide BSA/AML Compliance Program
5. Within 60 days of completion of the BSA/AML Review described in paragraph 4 hereof, FFC shall submit to the Reserve Bank a revised written
firmwide BSA/AML compliance program acceptable to the Reserve Bank that describes the specific actions that will be taken, including timelines for completion, to ensure that the services that FFC performs for the Subsidiary Banks regarding
compliance with applicable BSA/AML Requirements meets regulatory expectations. The revised program shall, at a minimum, include:
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(a) management of the program by a qualified compliance officer, who is supported by adequate
numbers of qualified and trained personnel and adequate resources, and is responsible for implementing and maintaining a program that is commensurate with the organizations size and risk profile, and periodic re-evaluation of resources and
staffing needs;
(b) internal controls designed to ensure compliance by the Subsidiary Banks with the BSA/AML Requirements, including, but
not limited to, currency transaction reporting (including ATM deposits) and currency transaction reporting exemption procedures consistent with sections 1010.311 and 1020.311 of Chapter X of the U.S. Department of the Treasurys regulations (31
C.F.R. §§ 1010.311 and 1020.311);
(c) written policies, procedures, and compliance risk management standards;
(d) a comprehensive BSA/AML risk assessment process;
(e) enhanced training for all appropriate affiliate personnel that perform BSA/AML compliance-related services for the Subsidiary Banks that
is effective in all aspects of the BSA/AML Requirements, and internal policies and procedures; and
(f) independent testing for compliance
with the BSA/AML Requirements services that FFC performs for the Subsidiary Banks;
Bank BSA/AML Compliance Program
6. Within 90 days of this Order, the Bank shall submit to the Reserve Bank a written revised program acceptable to the Reserve Bank for
compliance with the BSA/AML Requirements. The program shall include provisions for updates on an ongoing basis, as necessary, to incorporate amendments to the BSA and the rules and regulations issued thereunder. At a minimum, the revised program
shall include:
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(a) management of the program by a qualified compliance officer, who is supported by adequate
numbers of qualified and trained personnel and adequate resources, and is responsible for implementing and maintaining a program that is commensurate with the organizations size and risk profile, and periodic re-evaluation of resources and
staffing needs;
(b) a system of internal controls designed to ensure compliance by the Bank with applicable BSA/AML Requirements,
including, but not limited to, currency transaction reporting and currency transaction reporting exemption procedures consistent with sections 1010.311 and 1020.311 of Chapter X of the U.S. Department of the Treasurys regulations (31 C.F.R.
§§ 1010.311 and 1020.311);
(c) written policies, procedures, and compliance risk management standards;
(d) a comprehensive BSA/AML risk assessment process;
(e) enhanced training for Bank personnel that is effective in all aspects of the BSA/AML Requirements, and internal policies and procedures;
(f) independent testing for compliance with the BSA/AML Requirements; and
(g) measures to ensure that BSA/AML compliance services outsourced by the Bank to third-parties, including affiliates, are performed to meet
regulatory requirements;
Customer Due Diligence
7. Within 90 days of this Order, the Bank shall submit to the Reserve Bank a written revised program acceptable to the Reserve Bank for
conducting appropriate levels of customer due diligence by the Bank. At a minimum, the program shall include:
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(a) policies, procedures, and controls to ensure that the Bank collects, analyzes, and retains
complete and accurate customer information for all account holders on a timely basis;
(b) a plan, with timelines, to remediate deficient
due diligence for existing customer accounts;
(c) a methodology for assigning timely risk ratings to account holders that considers
factors such as type of customer, type of product services, and geographic location;
(d) a risk-focused assessment of the Banks
customer base to:
(i) identify the categories of customers whose transactions and banking activities are routine and usual; and
(ii) determine the appropriate level of enhanced due diligence necessary for those categories of customers that pose a heightened risk of
conducting potentially illicit activities at or through the Bank;
(e) for each customer whose transactions require enhanced due
diligence, procedures to:
(i) determine the appropriate documentation necessary to verify the identity and business activities of the
customer; and
(ii) understand the normal and expected transactions of the customer;
(f) procedures to ensure periodic reviews and evaluations are conducted and documented for all account holders; and
(g) measures to ensure that customer due diligence services that are outsourced to third-parties, including affiliates, are performed to meet
regulatory expectations.
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Suspicious Activity Monitoring and Reporting
8. Within 90 days of this Order, FFC shall submit, for the monitoring and reporting services it performs for the Subsidiary Banks, to the
Reserve Bank a written program acceptable to the Reserve Bank to reasonably ensure the identification and timely, accurate, and complete reporting of all known or suspected violations of law or suspicious transactions to law enforcement and
supervisory authorities, as required by applicable suspicious activity reporting laws and regulations. At a minimum, the program shall include:
(a) the scope and frequency of transaction monitoring;
(b) policies regarding the level and type of due diligence required when reviewing suspicious account activity; and
(c) maintenance of sufficient documentation with respect to the review and analysis of suspicious activity, including the resolution and
escalation of concerns.
9. Within 90 days of this Order, the Bank shall separately submit to the Reserve Bank a written program
acceptable to the Reserve Bank to reasonably ensure the identification and timely, accurate, and complete reporting of all known or suspected violations of law or suspicious transactions to law enforcement and supervisory authorities, as required by
applicable suspicious activity reporting laws and regulations. At a minimum, the program shall include:
(a) the elements set forth in
paragraphs 8(a) through (c) of this Order; and
(b) measures to ensure that transaction monitoring and suspicious activity reporting
functions that are outsourced to third-parties, including affiliates, are performed to meet regulatory requirements.
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Transaction Review
10. (a) Within 30 days of this Order, the Bank shall engage an independent third party, acceptable to the Reserve Bank, to conduct a review of
account and transaction activity associated with any high risk customer accounts conducted at, by, or through the Bank from January 1, 2014 to June 30, 2014 to determine whether suspicious activity involving high risk customer accounts or
transactions at, by, or through the Bank was properly identified and reported in accordance with applicable suspicious activity reporting regulations (the Transaction Review) and to prepare a written report detailing the independent
third partys findings (the Transaction Review Report). For each covered customer, the Transaction Review may commence as soon as the Bank has completed the remediation of the covered customers account in accordance with the
revised remediation program required by paragraph 7 of this Order.
(b) Based on the Reserve Banks evaluation of the results of the
Transaction Review, the Reserve Bank may direct the Bank to engage the independent third party to conduct a review of the types of transactions described in paragraph 10(a) for additional time periods.
11. Within 10 days of the engagement of the independent third party, but prior to the commencement of the Transaction Review, the Bank shall
submit to the Reserve Bank for approval an engagement letter that sets forth:
(a) the scope of the Transaction Review;
(b) the methodology for conducting the Transaction Review;
(c) the expertise and resources to be dedicated to the Transaction Review;
(d) the anticipated date of completion of the Transaction Review and the Transaction Review Report; and
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(e) a commitment that supporting material associated with the Transaction Review will be made
available to the Reserve Bank upon request.
12. The Bank shall provide to the Reserve Bank a copy of the Transaction Review Report at the
same time that the report is provided to the Bank.
13. Throughout the Transaction Review, the Bank shall ensure that all matters or
transactions required to be reported that have not previously been reported are reported in accordance with applicable rules and regulations.
Progress
Reports
14. Within 30 days after the end of each calendar quarter following the date of this Order, the boards of directors of FFC and
the Bank, or an authorized committee thereof, shall each submit to the Reserve Bank, written progress reports detailing the form and manner of all actions taken to secure compliance with this Order, a timetable and schedule to implement specific
remedial actions to be taken, and the results thereof.
Approval and Implementation of Plan and Programs
15. (a) FFC and the Bank, as applicable, shall submit the written plan and programs that are acceptable to the Reserve Bank within the
applicable time periods set forth in paragraphs 2, 5, 6, 7, 8, and 9 of this Order. Independent third parties acceptable to the Reserve Bank shall be retained by FFC and the Bank, as applicable, within the time periods set forth in paragraphs 3 and
10(a) of this Order. Engagement letters acceptable to the Reserve Bank shall be submitted within the time periods set forth in paragraphs 4 and 11 of this Order.
(b) Within 10 days of approval by the Reserve Bank, FFC and the Bank, as applicable, shall adopt the approved plan and programs. Upon
adoption, FFC and the Bank, as
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applicable, shall promptly implement the approved plan and programs, and thereafter fully comply with them.
(c) During the term of this Order, the approved plan, programs and engagement letters shall not be amended or rescinded without the prior
written approval of the Reserve Bank.
Communications
16. All communications regarding this Order shall be sent to:
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Mr. Christopher C. Henderson |
Assistant Vice President
Federal Reserve Bank of Philadelphia
Ten Independence Mall
Philadelphia, Pennsylvania 19106
Chairman, Chief Executive Officer
and President
Fulton Financial
Corporation
One Penn Square
Lancaster, Pennsylvania 17604
Chairman and Chief Executive Officer
Lafayette Ambassador Bank
360
Northampton Street
Bethlehem, Pennsylvania 18402
Miscellaneous
17. Notwithstanding any
provision of this Order to the contrary, the Reserve Bank may, in its sole discretion, grant written extensions of time to FFC and the Bank to comply with any provision of this Order.
18. The provisions of this Order shall be binding on FFC and the Bank, and each of their institution-affiliated parties, in their capacities
as such, and their successors and assigns.
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19. Each provision of this Order shall remain effective and enforceable until stayed, modified,
terminated, or suspended in writing by the Reserve Bank.
20. The provisions of this Order shall not bar, estop, or otherwise prevent the
Board of Governors, the Reserve Bank, or any other federal or state agency from taking any other action affecting FFC, the Bank, any of their subsidiaries, or any of their current or former institution-affiliated parties and their successors and
assigns.
By order of the Board of Governors of the Federal Reserve System effective this 4th day of September, 2014.
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FULTON FINANCIAL CORPORATION |
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BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM |
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By: |
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/s/ E. Philip Wenger |
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By: |
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/s/ Robert deV. Frierson |
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E. Philip Wenger |
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Robert deV. Frierson |
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Chairman, |
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Secretary of the Board |
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Chief Executive Officer, and
President |
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LAFAYETTE AMBASSADOR BANK |
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By: |
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/s/ Gerald A. Nau |
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Gerald A. Nau |
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Chairman and |
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Chief Executive Officer |
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