Exhibit 10.4

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

 

 

In the Matter of

 

U.S. BANCORP

Minneapolis, Minnesota

 

and

 

USB AMERICAS HOLDINGS COMPANY

Minneapolis, Minnesota

 

     

 

Docket  Nos.  18-005-B-HC

18-005- B-AC

18-005-CMP-B-HC

 

Order to Cease and Desist and Order of Assessment of a Civil Money Penalty
Issued Upon Consent Pursuant to the Federal Deposit Insurance Act, as Amended

 

WHEREAS, U.S. Bancorp, Minneapolis, Minnesota (“USB”), a registered bank holding
company, owns and controls U.S. Bank, N.A., Cincinnati, Ohio (“U.S. Bank N.A.”)
and multiple nonbank subsidiaries;

WHEREAS, U.S. Bank N.A. has multiple subsidiaries, one of which, USB Americas
Holdings Company, Minneapolis, Minnesota, (the “Agreement Corporation”), is an
agreement corporation organized under section 25A of the Federal Reserve Act (12
U.S.C. § 611 et seq.);

WHEREAS, USB is a large, complex organization that has a number of separate
business lines and legal entities, which operate in the United States and in
foreign jurisdictions, that must comply with a wide range of applicable laws,
rules, regulations, and standards;

WHEREAS, the Board of Governors of the Federal Reserve System (the “Board of
Governors”) is the appropriate federal banking agency supervisor of USB and the
Agreement Corporation;

 

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WHEREAS, USB has adopted a firmwide compliance risk management program designed
to identify and manage compliance risks across the consolidated organization
related to compliance with all applicable laws, rules, and regulations;

WHEREAS, USB’s firmwide compliance risk management program includes an anti-
money laundering (“AML”) program designed to identify and manage compliance
risks related to the Bank Secrecy Act (the “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); the AML regulations issued by the appropriate federal
supervisors for USB, U.S. Bank N.A., the Agreement Corporation, and other
subsidiaries of USB (collectively, the “BSA/AML Requirements”); and the
sanctions regimes imposed under the International Emergency Economic Powers Act,
50 U.S.C. §§ 1701-06, and the Trading with the Enemy Act, 50 U.S.C. §§ 5 and 16,
both of which are administered by OFAC (collectively, “OFAC Regulations”);

WHEREAS, USB lacked adequate risk management and compliance policies and
procedures to ensure that activities conducted at U.S. Bank N.A. and the
Agreement Corporation complied with applicable BSA/AML Requirements and OFAC
Regulations and were timely reported in response to inquiries by the Federal
Reserve Bank of Minneapolis (“Reserve Bank”);

WHEREAS, U.S. Bank N.A. consented in October 2015 to the issuance of a Consent
Order by the Office of the Comptroller of the Currency (the “OCC”) designed to
remedy deficiencies in U.S.Bank N.A.’s BSA/AML compliance program and has
consented to the assessment of a civil money penalty (the “OCC Orders”);

 

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WHEREAS, the Department of Justice (“DOJ”) has also been conducting an
investigation concerning U.S. Bank N.A.’s compliance with BSA/AML Regulations
and, in order to resolve the investigation, USB has agreed to enter into a
settlement agreement with the DOJ;

WHEREAS, U.S. Bank N.A. has entered into a settlement agreement with the
Financial Crimes Enforcement Network to address deficiencies in U.S. Bank N.A.’s
BSA/AML compliance program and has agreed to the assessment of a civil money
penalty;

WHEREAS, USB, the Agreement Corporation, the Board of Governors, and the Reserve
Bank have the common goals that USB, on a firmwide basis, and the Agreement
Corporation, operate in compliance with all applicable federal and state laws,
rules, and regulations regarding the BSA/AML Requirements and OFAC Regulations,
and that USB continues to implement an effective firmwide compliance risk
management program that is commensurate with USB’s compliance risk profile;

WHEREAS, the Board of Governors is issuing this Consent Order to Cease and
Desist and Assessment of a Civil Money Penalty (“Order”);

WHEREAS, pursuant to delegated authority, the undersigned signatories for USB
and the Agreement Corporation are authorized to enter into this Order on behalf
of USB and the Agreement Corporation, respectively, and consent to compliance
with each and every provision of this Order, and to waive any and all rights
that each 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 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;

 

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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)), USB and the Agreement Corporation shall
cease and desist and take affirmative action as follows:

Source of Strength

1. The board of directors of USB shall take appropriate steps to fully utilize
USB’s financial and managerial resources, pursuant to section 38A of the FDI Act
(12 U.S.C. § 1831o-1) 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 the bank,
including, but not limited to, taking steps to ensure that U.S. Bank N.A.
complies with any supervisory action taken by U.S. Bank N.A.’s federal or state
regulators.

Board Oversight

2. Within 60 days of this Order, USB’s board of directors shall submit a written
plan to strengthen board oversight of USB’s firmwide compliance risk management
program with regard to compliance with the BSA/AML Requirements and the OFAC
Regulations acceptable to the Reserve Bank. The plan shall describe the actions
that the board of directors will take to improve USB’s compliance risk
management with regard to the BSA/AML Requirements and the OFAC Regulations,
including, but not limited to, measures to ensure that compliance risk is
effectively managed across USB, including within and across business lines,
support units, legal entities, and jurisdictions in which USB and its
subsidiaries and affiliates operate. The plan shall, at a minimum, address,
consider, and include:

 

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(a) steps taken to date to meet the provisions of the OCC Orders and plans for
continued program enhancements;

(b) steps taken to date to improve the BSA/AML and OFAC compliance programs
within the Agreement Corporation and plans for continued program enhancements;
and

(c) steps taken to improve the information and reports that are regularly
reviewed by the board of directors, including compliance risk assessments, and
the status and results of measures taken, or to be taken, by senior officers to
remediate outstanding compliance issues and to comply with this Order and the
OCC Orders.

Regulatory Communications

3. Within 30 days of this Order, USB shall submit written policies and
procedures that govern, on a firmwide basis, the conduct of personnel in all
bank supervisory and regulatory matters, including, but not limited to,
interaction with and requests for information by examiners for the banking
regulators, acceptable to the Reserve Bank. The policies and procedures shall,
at a minimum, ensure that all personnel provide prompt, complete, and accurate
information to examiners and provide for employee training that emphasizes the
importance of full cooperation with banking regulators by all employees.

Customer Due Diligence

4. Within 60 days of this Order, the Agreement Corporation shall submit a
written enhanced customer due diligence program acceptable to the Reserve Bank.
At a minimum, the program shall include the steps the Agreement Corporation has
taken, or will take, to improve:

(a) policies, procedures, and controls to ensure that the Agreement Corporation
collects, analyzes, and retains complete and accurate customer information for
all account holders, to include, but not limited to:

 

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(i) documentation necessary to verify the identity and business activities of
the customer; and

(ii) documentation necessary to understand the normal and expected transactions
of the customer;

(b) a methodology for assigning risk ratings to account holders that considers
factors such as type of customer, type of products and services, and geographic
location;

(c) a risk-focused assessment of the Agreement Corporation’s customer base to:

(i) identify the categories of customers whose transactions and banking
activities are routine and usual;

(ii) identify the categories of customers that pose a heightened risk of
conducting potentially illicit activities at or through the Agreement
Corporation or its subsidiaries; and

(iii) 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 Agreement Corporation or its
subsidiaries;

(d) procedures to ensure periodic risk-based reviews and evaluations are
conducted and documented for all account holders; and

(e) measures to ensure that customer due diligence functions that are outsourced
to third-parties, including, but not limited to, affiliates, are performed to
meet regulatory requirements.

 

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Assessment of Civil Money Penalty

5. (a) The Board of Governors hereby assesses USB a civil money penalty in the
amount of $15 million; and

    (b) The civil money penalty shall be remitted at the time of the execution
of this Order by Fedwire transfer of immediately available funds to the Federal
Reserve Bank of Richmond, ABA No. 05 1000033, beneficiary, Board of Governors of
the Federal Reserve System. The Federal Reserve Bank of Richmond, on behalf of
the Board of Governors, shall distribute this sum to the U.S. Department of the
Treasury, pursuant to section 8(i) of the FDI Act (12 U.S.C. § 1818(i)).

Approval, Implementation, and Progress Reports

6. (a) USB and the Agreement Corporation, as applicable, shall submit written
plans, programs, policies, and procedures that are acceptable to the Reserve
Bank within the applicable time periods set forth in paragraphs 2, 3, and 4 of
this Order. Each plan, program, policy, or procedure shall contain a timeline
for full implementation of the plan, program, policy, or procedure with specific
deadlines for the completion of each component of the plan, program, policy, or
procedure.

    (b) Within 10 days of approval by the Reserve Bank, USB and the Agreement
Corporation, as applicable, shall adopt the approved plans, programs, policies,
and procedures. Upon adoption, USB and the Agreement Corporation, as applicable,
shall promptly implement the approved plans, programs, policies, and procedures,
and thereafter fully comply with them.

    (c) During the term of this Order, the approved plans, programs, policies
and procedures shall not be amended or rescinded without the prior written
approval of the Reserve Bank.

 

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7. Within 30 days after the end of each calendar quarter following the date of
this Order, the boards of directors of USB and the Agreement Corporation, or an
authorized committee thereof, shall 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. The Reserve Bank may, in writing,
discontinue the requirement for progress reports or modify the reporting
schedule.

Communications

 

  8. All communications regarding this Order shall be sent to:

 

  (a) Richard M. Ashton

Deputy General Counsel

Patrick M. Bryan

Assistant General Counsel

Board of Governors of the Federal Reserve System

20th & C Streets, N.W.

Washington, D.C. 20551

 

  (b) Diann G. Townsend

Vice President

Federal Reserve Bank of Minneapolis

90 Hennepin Avenue

Minneapolis, Minnesota 55401-1804

 

  (c) Andrew Cecere

President and

Chief Executive Officer

U.S. Bancorp

800 Nicollet Mall

Minneapolis, Minnesota 55402-7020

 

  (d) Craig E. Gifford

Executive Vice President

USB Americas Holdings Company

U.S. Bancorp Center

800 Nicollet Mall

Minneapolis, MN 55402-7020

 

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Miscellaneous

9. Notwithstanding any provision of this Order to the contrary, the Reserve Bank
may, in its sole discretion, grant written extensions of time to USB and the
Agreement Corporation.

10. The provisions of this Order shall be binding upon USB and the Agreement
Corporation and each of their institution-affiliated parties, in their
capacities as such, and their successors and assigns.

11. Each provision of this Order shall remain effective and enforceable until
stayed, modified, terminated, or suspended in writing by the Board of Governors.

12. Except as otherwise provided in this paragraph, the Board of Governors
hereby agrees not to initiate any further enforcement actions, including for
civil money penalties, against USB, and its affiliates, successors, and assigns,
with respect to the conduct described in the WHEREAS clauses of this Order to
the extent known by the Board of Governors as of the effective date of this
Order. This release and discharge shall not preclude or affect (i) any right of
the Board of Governors to determine and ensure compliance with this Order,
(ii) any proceedings brought by the Board of Governors to enforce the terms of
this Order, or (iii) any proceedings brought by the Board of Governors against
individuals who are or were institution-affiliated parties of USB.

13. Except as provided in paragraph 12, the provisions of this Order shall not
bar or otherwise prevent the Board of Governors, the Reserve Bank, or any
federal or state agency from taking any other action affecting the USB or any of
its current or former institution-affiliated parties and its successors and
assigns.

14. Nothing in this Order, express or implied, shall give to any person or
entity, other than the parties hereto and their successors hereunder, any legal
or equitable right, remedy, or claim under this Order.

 

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By order of the Board of Governors of the Federal Reserve System, effective this
14th day of February, 2018.

 

U.S. BANCORP    BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM By:   /s/
Andrew Cecere                                                         By:    /s/
Ann E. Misback                                                       

Andrew Cecere

President and Chief Executive Officer

     

Ann E. Misback

Secretary of the Board

 

USB AMERICAS HOLDINGS COMPANY By:   /s/ Craig E. Gifford  

Craig E. Gifford

Executive Vice President

 

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