Exhibit 10.1

 

AGREEMENT BY AND BETWEEN
Sterling Bank and Trust, FSB
Southfield, Michigan
and
The Office of the Comptroller of the Currency

 

 

Sterling Bank and Trust, FSB, Southfield, Michigan (“Bank”) and the Office of
the Comptroller of the Currency (“OCC”) wish to assure the safety and soundness
of the Bank and its compliance with laws and regulations.

 

The Comptroller of the Currency (“Comptroller”) has found unsafe or unsound
practices relating to the Bank’s credit administration and violations of law
relating to certain aspects of the Bank’s Bank Secrecy Act/Anti-Money Laundering
(“BSA/AML”) compliance program.

 

Therefore, the OCC, through the duly authorized representative of the
Comptroller, and the Bank, through its duly elected and acting Board of
Directors (“Board”), hereby agree that the Bank shall operate at all times in
compliance with the following:

 

ARTICLE I

 

JURISDICTION

 

(1)                                   The Bank is an “insured depository
institution” as that term is defined in 12 U.S.C. § 1813(c)(2).

 

(2)                                   The Bank is a Federal savings association
within the meaning of 12 U.S.C. § 1813(q)(1)(C), and is chartered and examined
by the OCC. See 12 U.S.C. §§ 1461 et seq., 5412(b)(2)(B).

 

(3)                                   The OCC is the “appropriate Federal
banking agency” as that term is defined in 12 U.S.C. § 1813(q).

 

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ARTICLE II

 

COMPLIANCE COMMITTEE

 

(1)                              Within sixty (60) days of the date of this
Agreement, the Board shall appoint a Compliance Committee of at least three
(3) members of which a majority shall be directors who are not employees or
officers of the Bank or any of its subsidiaries or affiliates. The Board shall
submit in writing to the Assistant Deputy Comptroller the names of the members
of the Compliance Committee within ten (10) days of their appointment. In the
event of a change of the membership, the Board shall submit in writing to the
Assistant Deputy Comptroller within ten (10) days the name of any new or
resigning committee member. The Compliance Committee shall monitor and oversee
the Bank’s compliance with the provisions of this Agreement. The Compliance
Committee shall meet at least quarterly and maintain minutes of its meetings.

 

(2)                              By September 30, 2019, and thereafter within
thirty (30) days after the end of each quarter, the Compliance Committee shall
submit to the Board a written progress report setting forth in detail:

 

(a)                               a description of the corrective actions needed
to achieve compliance with each Article of this Agreement;

 

(b)                              the specific corrective actions undertaken to
comply with each Article of this Agreement;

 

(c)                               the results and status of the corrective
actions; and

 

(d)                             how each violation of law identified in the
Report of Examination dated as of March 31, 2018 or subsequently discovered is
being or has been corrected during the reporting period.

 

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(3)                              Upon receiving each written progress report,
the Board shall forward a copy of the report, with any additional comments by
the Board, to the Assistant Deputy Comptroller within ten (10) days of the first
Board meeting following the Board’s receipt of such report, unless additional
time is granted in writing by the Assistant Deputy Comptroller.

 

 

ARTICLE III

 

CUSTOMER DUE DILIGENCE AND ENHANCED DUE DILIGENCE

 

(1)                              Within one hundred and eighty (180) days of the
date of this Agreement, the Board shall submit to the Assistant Deputy
Comptroller, for a prior written determination of no supervisory objection, a
revised customer due diligence and enhanced due diligence program to ensure
appropriate collection and analysis of customer information when opening new
accounts, when renewing or modifying existing accounts for customers, and when
the Bank obtains event-driven information indicating that it would be prudent to
obtain updated information. The program must be adequate to ensure that the Bank
understands the nature of its customer relationships and develops an accurate
customer risk profile, and shall ensure the Bank operates in accordance with
applicable law. At a minimum, the revisions must include:

 

(a)                               policies and procedures to ensure the Bank
conducts sufficient due diligence on related account parties;

 

(b)                              policies and procedures to ensure customer due
diligence questionnaires are completed for required account types and
appropriately imported and maintained in the Bank’s suspicious activity
monitoring system;

 

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(c)                               policies and procedures to outline which
account types are exempt from the requirement to complete a customer due
diligence questionnaire, with a documented rationale for the exemption;

 

(d)                             a revised customer risk rating methodology to
ensure weighting criteria is effective in identifying high-risk customers and
correlates to customer risk ratings in the Bank’s suspicious activity monitoring
system;

 

(e)                               revised policies and procedures with respect
to account closures that:

 

(i)                                  outline reasons for account closure that
would result in a customer not being able to re-establish a relationship with
the Bank;

 

(ii)                              establish effective procedures for closing a
customer relationship for BSA reasons;

 

(iii)                          implement appropriate and effective controls to
require that a customer whose relationship was closed cannot be re-established
without appropriate elevated levels of approval; and

 

(iv)                          require that the elevated risk associated with
reopening of any account closed for BSA reasons is documented and reflected in
the customer’s risk rating;

 

(f)                                policies and procedures to require that
enhanced due diligence searches are conducted consistently according to the
Bank’s processes and are appropriately documented, with any known or potential
negative news fully investigated and rationale for false positives appropriately
documented;

 

(g)                              ongoing due diligence reviews for moderate- and
high-risk customers; and

 

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(h)                              a secondary quality assurance review process
conducted by the BSA Officer or his/her designee that includes, but is not
limited to the following:

 

(i)                                  enhanced due diligence reviews, conducted
periodically for all high-risk customers and their related accounts, to
determine whether account activity is consistent with the customer’s expected
activity and the stated purpose of the account, and, as appropriate,
documentation provided is validated;

 

(ii)                              periodic reviews of a sample of lending
questionnaires for customers rated low- and moderate-risk to ensure lending
staff are completing the questionnaire appropriately; and

 

(iii)                          customer risk ratings in the Bank’s suspicious
activity monitoring system.

 

(2)                              No later than the next Board meeting following
the receipt of the Assistant Deputy Comptroller’s written determination of no
supervisory objection, the Board shall adopt, and management shall immediately
implement and thereafter ensure adherence to the revised program.

 

 

ARTICLE IV

 

SUSPICIOUS ACTIVITY MONITORING

 

(1)                              Within ninety (90) days of the date of this
Agreement, the Board shall submit to the Assistant Deputy Comptroller, for a
prior written determination of no supervisory objection, a revised suspicious
activity monitoring program to ensure, pursuant to 12 C.F.R. § 163.180, the
timely and appropriate identification and review of suspicious transaction
activity, disposition of

 

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suspicious activity alerts, and filing of Suspicious Activity Reports (“SARs”).
This program shall ensure the Bank operates in accordance with applicable law,
including 12 C.F.R. § 163.180. At a minimum, the revisions must include:

 

(a)                               effective processes and staff to ensure
identification, investigation, monitoring, and reporting of suspicious activity,
which shall include implementing and adhering to a process to improve monitoring
for the lending activities as specified in the Report of Examination dated as of
March 31, 2018;

 

(b)                              an enhanced written BSA/AML risk assessment
that timely and accurately identifies the BSA/AML risks posed to the Bank, and
that includes:

 

(i)                                  detailed analysis of BSA/AML risks in all
products and services, and assignment of an inherent and residual risk to each;

 

(ii)                              detailed analysis of the effectiveness of the
Bank’s risk management processes, including its system of internal controls, and
identification of any gaps or weaknesses when determining residual risk; and

 

(iii)                          revised scoring for low-, moderate-, and
high-risk to ensure risk ratings are appropriately stratified;

 

(c)                               revised policies and procedures to require
business line referrals of suspicious activity to the BSA department and ensure
that internal referral processes are consistently followed. The policies and
procedures shall include requirements for:

 

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(i)                                  consistent documentation and tracking of
business line referrals, with a case created for each referral in the Bank’s
suspicious activity monitoring system; and

 

(ii)                              training for all employees, including quality
control personnel and fraud investigators, regarding the internal process for
referring suspicious activity; and

 

(d)                             a sufficient secondary quality assurance review
process to ensure that disposition of suspicious activity alerts and SAR
decision-making and filing are working effectively.

 

(2)                              No later than the next Board meeting following
the receipt of the Assistant Deputy Comptroller’s written determination of no
supervisory objection, the Board shall adopt, and management shall immediately
implement and thereafter ensure adherence to the revised program.

 

 

ARTICLE V

 

LOOKBACK

 

(1)                              Within ninety (90) days of the date of this
Agreement, the Board shall submit to the Assistant Deputy Comptroller, for a
prior written determination of no supervisory objection, the name,
qualifications, and terms of engagement of a proposed independent, third-party
consultant to review and provide a written report on the Bank’s suspicious
activity monitoring (“Lookback”). Refer to OCC Bulletin 2013-33, “Use and Review
of Independent Consultants in Enforcement Actions: Guidance for Bankers” for
guidance. The specific requirements of the Lookback have been communicated
separately to the Bank in a Supervisory Letter dated June 14, 2019.

 

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(2)                              Upon completion of the Lookback, the written
findings (“Lookback Report”) shall be reported to the Board, and the independent
consultant shall provide a copy of the written findings, supporting materials,
and work papers directly to the Assistant Deputy Comptroller. The Lookback
Report shall contain a list of customers recommended to the Bank for further
review, any SARs that the Bank should file or existing SARs that the Bank should
modify to comply with the requirements of 12 C.F.R. § 163.180, a list of
customers and customer relationships that represent excessive risk for BSA/AML
compliance, and a conclusion about the effectiveness of the Bank’s suspicious
activity monitoring. The Lookback Report shall also, among other things,
describe:

 

(a)                               the methodologies and tools used in conducting
the review;

 

(b)                              the process followed for investigating
customers and customer activities;

 

(c)                               a summary of the number and types of customers
and customer relationships reviewed;

 

(d)                             the number of customers and customer
relationships requiring additional investigation; and

 

(e)                               the number of customers the independent
consultant recommended to the Bank for further review, SAR filings, or
modifications to existing SAR filings, including the number of customers where
the Bank determined not to file a SAR.

 

(3)                              The Bank shall determine whether to file SARs,
in accordance with 12 C.F.R. § 163.180, for any previously unreported suspicious
activity identified during the Lookback. The Bank shall provide all of its
supporting materials and work papers associated with the Lookback to the OCC.

 

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(4)                              If the results of the Lookback reflect a
systemic failure on behalf of the Bank to file SARs in accordance with 12 C.F.R.
§ 163.180, the OCC, at its sole discretion, may expand the Lookback. If an
expanded Lookback is deemed appropriate by the OCC, the expanded Lookback shall
be completed in accordance with the requirements of this Article.

 

 

ARTICLE VI

 

MODEL RISK MANAGEMENT

 

(1)                              Within one hundred and eighty (180) days of the
date of this Agreement, the Board shall submit to the Assistant Deputy
Comptroller, for a prior written determination of no supervisory objection,
revised policies and procedures to ensure effective BSA/AML model risk
management for its automated suspicious activity monitoring system. Refer to OCC
Bulletin 2011-12, “Sound Practices for Model Risk Management” for guidance. The
policies and procedures shall ensure the Bank’s BSA/AML model risk management
and validation are consistent with safe and sound practices and ensure effective
implementation of all corrective actions in the Report of Examination dated as
of March 31, 2018. At a minimum, the revisions must ensure:

 

(a)                               periodic testing and tuning of existing
parameters, with sufficient documentation supporting their appropriateness given
the Bank’s products, services, and geographic markets, or supporting that the
parameters need to be changed;

 

(b)                              dual controls over rule adjustments and
behavioral reviews, to ensure that changes are appropriate and that all changes
are documented, including identification of the individuals making and approving
any changes;

 

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(c)                               tuning of the suspicious activity monitoring
system to customize customer settings in order to more accurately capture
suspicious activity specific to each customer;

 

(d)                             review of current wire transfer configurations
to determine if they are appropriate to monitor for suspicious activity. The
Bank must:

 

(i)                                  document and maintain supporting rationale
for funds transfer configurations;

 

(ii)                              conduct a detailed analysis to identify gaps
within the model to monitor suspicious activity within funds transfers, relative
to the risks of the loan products and customer base; and

 

(iii)                          if the Bank’s suspicious activity monitoring
system is unable to appropriately monitor for suspicious activity for wire
transfers, the Bank must implement manual reports and processes to address this
gap; and

 

(e)                               within one hundred and twenty (120) days of
the implementation date of the revised policies and procedures, an independent
validation of the model used in the suspicious activity monitoring system
conducted by a qualified, independent third party. As part of this validation,
appropriate and qualified individuals must conduct outcomes analysis, to include
the following:

 

(i)                                  integrity of data inputs from all products,
services, and transactions, to include international and domestic wires; and

 

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(ii)                         evaluation of the appropriateness of thresholds in
criteria used to identify potential suspicious activity.

 

(2)                              No later than the next Board meeting following
the receipt of the Assistant Deputy Comptroller’s written determination of no
supervisory objection, the Board shall adopt, and management shall immediately
implement and thereafter ensure adherence to the revised policies and
procedures.

 

 

ARTICLE VII

 

BSA STAFFING

 

(1)                              Within forty-five (45) days of the date of this
Agreement, the Board shall ensure that the Bank’s BSA Department maintains
sufficient personnel with the requisite expertise, training, and skills
necessary to manage the Bank’s BSA/AML risk. Any needed enhancements in staffing
in the interim must be addressed through the use of contractors until permanent
staff is in place.

 

 

ARTICLE VIII

 

RESIDENTIAL REAL ESTATE LOAN UNDERWRITING

 

(1)                              Within ninety (90) days of the date of this
Agreement, the Board shall submit to the Assistant Deputy Comptroller, for a
prior written determination of no supervisory objection, revised policies and
procedures to ensure effective controls over loan underwriting. Refer to the
“Residential Real Estate” booklet of the Comptroller’s Handbook for guidance.
The policies and procedures shall ensure the Bank operates in accordance with
applicable law. At a minimum, the revisions must include:

 

(a)                               effective controls and processes to collect
and verify employment and income;

 

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(b)                              verification of borrowers’ ability to repay
indebtedness in a timely manner;

 

(c)                               verification of borrowers’ income and cash
flow information used in the Bank’s underwriting process for non-owner occupied
properties;

 

(d)                             effective controls and verification procedures
for the acceptance of gift letters, including proper execution and endorsement
by both the donor and recipient; and

 

(e)                               effective oversight of exceptions identified
by the Bank’s quality control function, including proper escalation and
disposition of concerns raised by quality control to management or the BSA
Officer.

 

(2)                              No later than the next Board meeting following
the receipt of the Assistant Deputy Comptroller’s written determination of no
supervisory objection, the Board shall adopt, and management shall immediately
implement and thereafter ensure adherence to the revised policies and
procedures.

 

 

ARTICLE IX

 

VIOLATIONS OF LAW

 

(1)                              The Board shall require and the Bank shall
immediately take all necessary steps to correct each violation of law, rule, or
regulation cited in the most recent Report of Examination or any subsequent
Report of Examination, or brought to the Board or Bank’s attention in writing by
management, regulators, auditors, loan review, or other third parties. Within
thirty (30) days after the violation is cited or brought to the Board or Bank’s
attention, Bank management shall provide to the Board and Compliance Committee a
list of any violations that have not been corrected. This list shall also
include an explanation of the actions taken to correct the violation,

 

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the reason why the violation has not yet been corrected, and a plan to correct
the violation by a specified date.

 

 

ARTICLE X

 

GENERAL BOARD RESPONSIBILITIES

 

(1)                              The Board shall ensure that the Bank has timely
adopted and implemented all corrective actions required by this Agreement, and
shall verify that the Bank adheres to the corrective actions and they are
effective in addressing the Bank’s deficiencies that resulted in this Agreement.

 

(2)                              In each instance in which this Agreement
imposes responsibilities upon the Board, it is intended to mean that the Board
shall:

 

(a)                               authorize, direct, and adopt corrective
actions on behalf of the Bank as may be necessary to perform the obligations and
undertakings imposed on the Board by this Agreement;

 

(b)                              ensure that the Bank has sufficient processes,
management, personnel, control systems, and corporate and risk governance to
implement and adhere to all provisions of this Agreement;

 

(c)                               require that Bank management and personnel
have sufficient training and authority to execute their duties and
responsibilities pertaining to or resulting from this Agreement;

 

(d)                             hold Bank management and personnel accountable
for executing their duties and responsibilities pertaining to or resulting from
this Agreement;

 

(e)                               require appropriate, adequate, and timely
reporting to the Board by Bank management of corrective actions directed by the
Board to be taken under

 

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the terms of this Agreement; and

 

(f)                                address any noncompliance with corrective
actions in a timely and appropriate manner.

 

 

ARTICLE XI

 

OTHER PROVISIONS

 

(1)                              Regarding the effect of this Agreement, and
unless the OCC informs the Bank otherwise in writing with respect to any or all
of the subparts below:

 

(a)                               pursuant to 12 C.F.R. § 5.3(g)(5), the Bank is
not an “eligible savings association” for the purposes of 12 C.F.R. Part 5; and

 

(b)                              pursuant to 12 C.F.R. § 5.51(c)(7)(ii), the
Bank is not subject to the restrictions in 12 C.F.R. § 5.51 requiring prior
notice to the OCC of changes in directors and senior executive officers or the
limitations on golden parachute payments set forth in 12 C.F.R. Part 359,
subject to the requirements contained in 12 C.F.R. § 5.51(c)(7)(i), (iii).

 

(2)                              This Agreement supersedes all prior OCC
communications issued pursuant to 12 C.F.R. §§ 5.3(g)(5) and 5.51(c)(7)(ii).

 

 

ARTICLE XII

 

CLOSING

 

(1) This Agreement is intended to be, and shall be construed to be, a “written
agreement” within the meaning of 12 U.S.C. § 1818, and expressly does not form,
and may not be construed to form, a contract binding on the United States, the
OCC, or any officer, employee, or agent of the OCC. Notwithstanding the absence
of mutuality of obligation, or of consideration, or of a contract, the OCC may
enforce any of the commitments or obligations

 

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herein undertaken by the Bank under its supervisory powers, including 12 U.S.C.
§ 1818(b)(1), and not as a matter of contract law. The Bank expressly
acknowledges that neither the Bank nor the OCC has any intention to enter into a
contract. The Bank also expressly acknowledges that no officer, employee, or
agent of the OCC has statutory or other authority to bind the United States, the
U.S. Treasury Department, the OCC, or any other federal bank regulatory agency
or entity, or any officer, employee, or agent of any of those entities to a
contract affecting the OCC’s exercise of its supervisory responsibilities.

 

(2)                                   This Agreement is effective upon its
issuance by the OCC, through the Comptroller’s duly authorized representative.
Except as otherwise expressly provided herein, all references to “days” in this
Agreement shall mean calendar days and the computation of any period of time
imposed by this Agreement shall not include the date of the act or event that
commences the period of time. The provisions of this Agreement shall remain
effective and enforceable except to the extent that, and until such time as,
such provisions are amended, suspended, waived, or terminated in writing by the
OCC, through the Comptroller’s duly authorized representative. If the Bank seeks
an extension, amendment, suspension, waiver, or termination of any provision of
this Agreement, or within any plan or program submitted pursuant to this
Agreement, the Board or a Board-designee shall submit a written request to the
Assistant Deputy Comptroller asking for relief. Any request submitted pursuant
to this paragraph shall include a statement setting forth in detail the special
circumstances that prevent the Bank from complying with the relevant
provision(s) of the Agreement or plan or program submitted pursuant to this
Agreement, and shall be accompanied by relevant supporting documentation. The
OCC’s decision concerning a request submitted pursuant to this paragraph, which
will be communicated to the Board in writing, is final and not subject to
further review.

 

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(3)                                        The Bank will not be deemed to be in
compliance with this Agreement until it has adopted, implemented, and adhered to
all of the corrective actions set forth in each Article of this Agreement; the
corrective actions are effective in addressing the Bank’s deficiencies; and the
OCC has verified and validated the corrective actions. An assessment of the
effectiveness of the corrective actions requires sufficient passage of time to
demonstrate the sustained effectiveness of the corrective actions.

 

(4)                                        The OCC may enforce the terms of this
Agreement pursuant to its statutory authority, including 12 U.S.C. § 1818(i)(2).

 

(5)                                        Each citation, guidance, or issuance
referenced in this Agreement includes any subsequent citation, guidance, or
issuance that replaces, supersedes, amends, or revises the referenced cited
citation, guidance, or issuance.

 

(6)                                        No separate promise or inducement of
any kind has been made by the OCC, or by its officers, employees, or agents, to
cause or induce the Bank to enter into this Agreement.

 

(7)                                        All reports, plans, or programs
submitted to the OCC pursuant to this Agreement shall be forwarded, by overnight
mail or via email, to the following:

 

Allyn Adams

Assistant Deputy Comptroller
200 Public Square, Suite 1610
Cleveland, OH 44114

 

(8)                              The terms of this Agreement, including this
paragraph, are not subject to amendment or modification by any extraneous
expression, prior agreements, or prior arrangements between the parties, whether
oral or written.

 

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IN TESTIMONY WHEREOF, the undersigned, authorized by the Comptroller as his duly
authorized representative, has hereunto set his signature on behalf of the
Comptroller.

 

/s/ Allyn Adams

 

6/18/2019

Allyn Adams

 

Date

Assistant Deputy Comptroller

 

 

Cleveland Field Office

 

 

 

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IN TESTIMONY WHEREOF, the undersigned, as the duly elected and acting Board of
Directors of Sterling Bank and Trust, FSB, have hereunto set their signatures on
behalf of the Bank.

 

 

/s/ Barry Allen

 

6/18/2019

Barry Allen

 

Date

 

 

 

/s/ Gary Judd

 

6/18/2019

Gary Judd

 

Date

 

 

 

/s/ Seth Meltzer

 

6/18/2019

Seth Meltzer

 

Date

 

 

 

/s/ Sandra Seligman

 

7/9/2019

Sandra Seligman

 

Date

 

 

 

/s/ Peter Sinatra

 

6/18/2019

Peter Sinatra

 

Date

 

 

 

/s/ Rachel Tronstein Stewart

 

7/16/2019

Rachel Tronstein Stewart

 

Date

 

 

 

/s/ Benjamin Wineman

 

6/18/2019

Benjamin Wineman

 

Date

 

 

 

/s/ Lyle Wolberg

 

6/18/2019

Lyle Wolberg

 

Date

 

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