Contract analysis

I. PURPOSE AND EXECUTIVE SUMMARY A. Purpose The purpose of this memorandum is to provide comprehensive, actionable guidance to Belmont Ridge Bank National Association ("BRB" or the "Bank") on preparing for the anticipated follow-up targeted BSA/AML examination by the Office of the Comptroller of the Currency (the "OCC"). Calderwood & Harkness LLP ("C&H") expects the OCC to schedule this follow-up examination followin

II. ANTICIPATED EXAMINATION SCOPE AND FOCUS AREAS A. Basis for Follow-Up Examination It is standard OCC practice to conduct a targeted follow-up examination following the issuance of a consent order or other formal enforcement action. The purpose of such an examination is to validate that the institution has achieved the required remediation and to assess whether the consent order can be terminated or whether additio

1. OFAC Sanctions Screening The OCC's findings regarding OFAC sanctions screening represented one of the most significant deficiencies cited in the Consent Order and the most operationally complex to remediate given the Bank's extensive Banking-as-a-Service ("BaaS") operations. The follow-up examination team will focus on the following: Screening Coverage. Examiners will test whether 100% of transactions across all c

2. SAR Filing Deficiencies The Consent Order cited pervasive deficiencies in the Bank's Suspicious Activity Report ("SAR") filing processes, including an unacceptable backlog of unreviewed alerts and prolonged filing timelines. The follow-up examination will address the following: Backlog Clearance. Examiners will validate that the backlog of 2,400 unreviewed alerts that existed as of September 2024 was fully cleared

3. CDD/EDD Failures The Consent Order identified systemic failures in the Bank's Customer Due Diligence ("CDD") and Enhanced Due Diligence ("EDD") processes, particularly with respect to high-risk accounts. The follow-up examination will focus on: Remediation of Existing Accounts. Examiners will confirm that the Bank remediated all 47,000 high-risk accounts that were identified as lacking adequate CDD/EDD documentati

4. Model Validation The Consent Order cited the Bank's failure to conduct timely independent validation of its transaction monitoring system, the Veridian Transaction Monitoring System ("Veridian TMS"). The follow-up examination will examine: System Upgrade and Deployment. Examiners will verify that Veridian TMS v.10.0 was deployed following successful completion of User Acceptance Testing ("UAT") by the August 1, 20

5. Board Oversight The Consent Order's findings regarding deficient Board oversight represented a governance failure of significant concern to the OCC. The follow-up examination will examine: Compliance Committee Establishment and Functioning. Examiners will evaluate the establishment and ongoing operations of the Board-level Compliance Committee, chaired by James Rutherford. This evaluation will include a review of

III. DOCUMENT READINESS AND EVIDENCE OF REMEDIATION A. Master Documentation Framework The single most important element of examination preparation is the organization and availability of documentary evidence demonstrating that the Bank has achieved compliance with every article of the Consent Order. To this end, BRB should establish a centralized "Examination Readiness Repository" (the "Repository") organized by Cons

1. OFAC Sanctions Screening The following documents should be compiled and organized for the OFAC sanctions screening workstream: (a) Revised OFAC Compliance Policy (enterprise-wide), including the approval record and effective date, demonstrating comprehensive coverage of all Bank activities and all BaaS partner channels. (b) OFAC Screening Procedures Manual, setting forth operational procedures for all transaction

2. SAR Backlog and Process Improvement The following documents should be compiled and organized for the SAR backlog and process improvement workstream: (a) SAR Backlog Triage Protocol documentation, including the methodology for prioritizing and dispositionining the 2,400 unreviewed alerts, the staffing resources deployed (including Pinnacle Compliance Solutions temporary staff), and the quality assurance procedures

3. CDD/EDD Remediation The following documents should be compiled and organized for the CDD/EDD remediation workstream: (a) CDD/EDD Remediation Methodology & Prioritization documentation, describing the methodology used to identify and prioritize the 47,000 high-risk accounts for remediation, the risk-stratification criteria applied, and the procedures for conducting and documenting remediation reviews. (b) Progress

4. Transaction Monitoring Model Validation The following documents should be compiled and organized for the transaction monitoring model validation workstream: (a) Veridian TMS v.10.0 implementation records, including the project charter, implementation timeline, system requirements documentation, data migration records, and UAT completion documentation demonstrating successful testing by the August 1, 2025 deadline.

5. Board and Governance The following documents should be compiled and organized for the Board and governance workstream: (a) Board Resolution adopted by February 28, 2025, acknowledging the Consent Order, establishing the Compliance Committee, and authorizing the $42,500,000 remediation budget (exclusive of the $14,500,000 civil money penalty). (b) Compliance Committee Charter, including the Committee's mandate, mem

IV. INTERVIEW PREPARATION FOR KEY PERSONNEL A. General Interview Preparation Principles OCC follow-up examinations invariably include interviews with key Bank personnel. These interviews serve multiple purposes: they allow examiners to test whether personnel have substantive knowledge of the Bank's compliance program, whether they are engaged in the remediation effort, whether they understand the deficiencies that ga