PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP
1285 Avenue of the Americas, 40th Floor New York, New York 10019
February 14, 2025
MEMORANDUM
TO: Gregory Nardone, Esq. General Counsel & Corporate Secretary Belmont Ridge Bank National Association 680 Lexington Avenue, 22nd Floor New York, New York 10022
CC: Samantha Reeves, Chief Financial Officer, BRB / Belmont Ridge Financial Group, Inc. Patricia Langston, Chief Compliance Officer, Belmont Ridge Bank National Association Yuki Nakamura, Esq., Calderwood & Harkness LLP
FROM: Philip Hartmann, Partner, Calderwood & Harkness LLP
RE: Payment Logistics for Civil Money Penalty — OCC Consent Order No. OCC-2025-003
C&H Matter No.: 1045-00002
PRIVILEGE DESIGNATION: This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product prepared in anticipation of litigation and in connection with the provision of legal advice. It is intended solely for the use of the addressee and the individuals copied hereon. This memorandum should not be disclosed, distributed, or reproduced, in whole or in part, without the prior written consent of Calderwood & Harkness LLP. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
I. PURPOSE AND EXECUTIVE SUMMARY
This memorandum advises Belmont Ridge Bank National Association ("BRB," OCC Charter No. 48271, FDIC Certificate No. 31845) on the logistics, procedures, and related considerations for the timely payment of the $14,500,000 civil money penalty (the "CMP") assessed pursuant to Consent Order No. OCC-2025-003 (the "Consent Order"), issued by the Office of the Comptroller of the Currency (the "OCC") on January 15, 2025. The CMP was imposed in connection with significant deficiencies identified by the OCC in BRB's Bank Secrecy Act / Anti-Money Laundering ("BSA/AML") compliance program, as described more fully in the Consent Order and in our prior memorandum to BRB's Board of Directors dated January 20, 2025.
Under the terms of the Consent Order, the CMP is due within sixty (60) calendar days of the Consent Order's effective date, establishing a payment deadline of March 16, 2025. Because March 16, 2025 falls on a Sunday, and in light of Federal Reserve wire processing considerations, Calderwood & Harkness LLP ("C&H") recommends that BRB complete the wire transfer no later than Friday, March 14, 2025, with an optimal target transmission date of Thursday, March 13, 2025, to provide a one-business-day buffer for settlement and confirmation.
Timely payment of the CMP is a threshold obligation under the Consent Order. Failure to remit the full penalty amount by the stated deadline could expose BRB to additional civil money penalties, adverse supervisory consequences, potential enforcement escalation, and reputational harm. Payment of the CMP in full and on time will also serve as an important demonstration of BRB's good faith and cooperative posture toward the OCC, which will be relevant in the context of the ongoing supervisory relationship and the remediation program required by the Consent Order.
This memorandum addresses the following topics in detail:
(a) the CMP amount and deadline computation, including the recommended wire transmission date;
(b) wire transfer instructions, payment method, and funding source and liquidity considerations;
(c) accounting and financial reporting treatment under applicable accounting standards, including balance sheet and income statement impact and public company disclosure considerations for Belmont Ridge Financial Group, Inc. ("BRFG," NYSE: BRFG), BRB's parent holding company;
(d) federal income tax treatment, including the non-deductibility of the CMP under 26 U.S.C. § 162(f), the analysis of exceptions for restitution and remediation amounts, state tax implications, and IRS reporting obligations;
(e) confirmation and documentation procedures with the OCC, including pre-payment notification, wire confirmation, formal post-payment confirmation, and procedures for obtaining OCC acknowledgment of receipt; and
(f) recommended internal approvals, authorization procedures, and a summary action item timeline to ensure orderly execution.
Each of these topics is discussed in the sections that follow. This memorandum should be read in conjunction with the Consent Order itself, the Board Resolution currently under development, and C&H's separate memoranda on BRB's securities disclosure obligations and the engagement of Thornfield Consulting Group LLC as the independent consultant.
II. PAYMENT AMOUNT AND DEADLINE CALCULATION
A. CMP Amount
The CMP assessed under the Consent Order is $14,500,000 (fourteen million five hundred thousand dollars). This amount was assessed under the OCC's statutory authority pursuant to 12 U.S.C. § 1818(i)(2), which empowers the Comptroller of the Currency to impose civil money penalties against insured depository institutions and institution-affiliated parties for, among other things, violations of law, unsafe or unsound banking practices, and breaches of fiduciary duty.
As set forth in the Consent Order, the penalty was assessed in connection with the following significant deficiencies in BRB's BSA/AML compliance program, which collectively constituted violations of the Bank Secrecy Act (31 U.S.C. § 5311 et seq.) and its implementing regulations promulgated by the Financial Crimes Enforcement Network ("FinCEN") at 31 C.F.R. Chapter X:
(i) Inadequate Office of Foreign Assets Control ("OFAC") sanctions screening procedures, including failures to screen certain wire transfer originators and beneficiaries against the Specially Designated Nationals and blocked Persons List ("SDN List") on a timely basis;
(ii) Deficient Suspicious Activity Report ("SAR") filing practices, including material delays in the identification and filing of SARs and failures to file SARs in connection with transactions exhibiting indicators of suspicious activity;
(iii) Failures in Customer Due Diligence ("CDD") and Enhanced Due Diligence ("EDD") procedures, particularly with respect to high-risk customer segments, including foreign correspondent banking relationships and certain private banking clients;
(iv) Transaction monitoring model validation lapses, including the failure to conduct timely independent validation of BRB's automated transaction monitoring system and the use of outdated detection scenarios that failed to capture evolving typologies; and
(v) Board of Directors and senior management oversight deficiencies, including inadequate BSA/AML-related reporting to the Board, insufficient allocation of compliance resources, and failure to ensure that the BSA Officer had appropriate authority and access to information necessary to discharge the bank's compliance obligations.
The $14,500,000 penalty amount reflects the negotiated resolution between BRB and the OCC, and the Consent Order constitutes a final, non-appealable order as to the CMP. BRB consented to the assessment of the CMP without admitting or denying the findings set forth in the Consent Order, consistent with standard OCC consent order practice.
B. Deadline Computation
The Consent Order specifies that the CMP shall be paid within sixty (60) calendar days of the effective date of the Consent Order. The effective date of the Consent Order is January 15, 2025, the date on which it was issued by the OCC and executed by BRB's authorized representatives.
The computation of the 60-day payment deadline is as follows:
• Effective date: January 15, 2025
• 60 calendar days from January 15, 2025: March 16, 2025
The deadline date of March 16, 2025 falls on a Sunday. While the Consent Order specifies the deadline in terms of calendar days and does not contain an express provision extending the deadline to the next business day when the final day falls on a weekend or federal holiday, C&H has considered the following factors in formulating its recommendation regarding the optimal wire transmission date:
1. The OCC's typical enforcement convention is to expect payment on or before the stated calendar day. When that day falls on a non-business day, the OCC generally expects that the payment will have been transmitted and settled prior to the weekend or holiday.
2. Fedwire Funds Service, the Federal Reserve's real-time gross settlement system through which large-value wire transfers are processed, operates only on business days. The Fedwire operating hours are generally 9:00 PM Eastern Time (prior day) through 7:00 PM Eastern Time, Monday through Friday, excluding Federal Reserve holidays. Wires initiated after the Fedwire cutoff time on Friday, March 14, 2025, would not settle until Monday, March 17, 2025, which would be one day past the stated deadline.
3. Even if a technical argument could be made that payment on Monday, March 17, 2025 (the next business day) satisfies the Consent Order, relying on such an argument introduces unnecessary risk and could be perceived negatively by the OCC.
Recommendation: Based on the foregoing analysis, C&H strongly recommends that BRB initiate the wire transfer on or before Thursday, March 13, 2025, with Friday, March 14, 2025 as the absolute latest date for wire transmission. This approach provides a minimum one-business-day buffer for settlement and ensures that the funds are received and credited by the U.S. Treasury well in advance of the March 16, 2025 deadline. Initiating the wire on March 13 is the preferred course of action, as it allows time for BRB's treasury operations team to address any operational issues (e.g., incorrect routing information, wire rejection, or system outages) that could delay settlement.
C. No Installment or Deferral Provisions
The Consent Order does not provide for installment payments, deferred payment, or any other modification of the CMP payment terms. The full $14,500,000 is due and payable in a single lump-sum payment within the 60-day period.
C&H notes that the OCC has, in rare circumstances, permitted installment payments of CMPs, typically in cases involving smaller community banks where a lump-sum payment would create capital adequacy concerns. No such circumstances exist here. Given BRB's size, financial condition, and capital position (discussed in Section III.C below), there is no basis for requesting a modification of the payment terms, and BRB should not submit any such request to the OCC. A request for installment payments or deferral could be viewed unfavorably by the OCC, potentially signaling financial weakness or a lack of commitment to the remediation process, and could adversely affect the supervisory relationship at a time when BRB must demonstrate full cooperation and compliance.
III. PAYMENT METHOD AND WIRE TRANSFER INSTRUCTIONS
A. Payment Method
The CMP must be paid by wire transfer to the United States Treasury. This is the standard payment method for CMPs imposed by the OCC, and the Consent Order specifies wire transfer as the required payment mechanism.
BRB should initiate the wire transfer through its Federal Reserve Bank account (maintained at the Federal Reserve Bank of New York) or, alternatively, through its primary correspondent banking relationship, if BRB's treasury operations team determines that routing through a correspondent provides any operational advantage. In either case, the wire must be transmitted via the Fedwire Funds Service to ensure same-day settlement in immediately available funds.
The wire transfer must include the following reference information to ensure proper identification and crediting of the payment:
(i) OCC Consent Order Number: OCC-2025-003;
(ii) BRB's OCC Charter Number: 48271;
(iii) BRB's Employer Identification Number (EIN): 13-6148320; and
(iv) Payment Notation: "Civil Money Penalty — Consent Order No. OCC-2025-003."
The inclusion of all four reference items is essential to ensure that the payment is correctly identified and credited by the U.S. Treasury. C&H has seen instances in other enforcement matters where the omission of reference information caused delays in the crediting of CMP payments, resulting in unnecessary complications and follow-up correspondence with the OCC. BRB should ensure that its treasury operations team includes all of the above information in the wire transfer origination message.
B. Wire Transfer Instructions
The payee for the wire transfer is the United States Treasury / Department of the Treasury. The specific routing number, account number, and any additional beneficiary information required for the wire transfer should be obtained directly from the OCC or from the payment instructions set forth in the Consent Order.
BRB's Treasury and Finance team, under the direction of Samantha Reeves, Chief Financial Officer, should obtain and confirm the specific wire transfer routing and account instructions through one or both of the following channels:
(i) The Consent Order itself: Section [●] of the Consent Order contains wire transfer instructions for the CMP payment. BRB's treasury operations team should review these instructions carefully and confirm their accuracy.
(ii) The OCC Northeastern District Office: BRB should contact Jonathan Frey, National Bank Examiner, at the OCC Northeastern District Office, 340 Madison Avenue, New York, New York 10017, to confirm the wire instructions and address any questions regarding the payment process.
Recommendation: C&H recommends that BRB's Treasury department confirm the wire instructions with the OCC at least ten (10) business days prior to the anticipated wire transmission date — that is, by approximately February 28, 2025. This advance confirmation will ensure the accuracy of the routing information, allow time to resolve any discrepancies, and avoid the risk of misdirected funds that could jeopardize timely payment.
The wire should be originated from a BRB operating account with sufficient immediately available funds to cover the full $14,500,000 CMP amount. BRB's treasury operations team should ensure that the originating account has been properly funded in advance of the wire date and that no holds, restrictions, or competing obligations could impede the wire transfer.
C. Funding Source and Liquidity Considerations
Based on BRB's most recently available financial data, the CMP payment should not present any liquidity, capital adequacy, or funding concerns. As of December 31, 2024, BRB reported the following key financial metrics:
The $14,500,000 CMP represents approximately 3.5% of BRB's FY 2024 net income of $412 million and constitutes an immaterial fraction (approximately 0.037%) of BRB's total assets of $38.7 billion. BRB's Tier 1 capital ratio of 11.2% is well above the minimum regulatory requirements (4% for Tier 1 leverage ratio, 6% for Tier 1 risk-based capital ratio under Basel III), and the CMP payment will have a negligible impact on BRB's capital ratios.
Notwithstanding the foregoing, C&H recommends that Samantha Reeves confirm, in writing, that the $14,500,000 wire transfer will not create any of the following issues:
(a) any liquidity shortfall or breach of internal liquidity risk management limits;
(b) any reduction in BRB's regulatory capital ratios below internal target levels or minimum well-capitalized thresholds;
(c) any interference with scheduled obligations, including upcoming interest payments, dividend distributions, or other material disbursements; or
(d) any adverse impact on BRB's compliance with the liquidity coverage ratio ("LCR") or net stable funding ratio ("NSFR") requirements applicable to BRB.
Based on the financial data summarized above, C&H does not anticipate that any such issues will arise, but the written confirmation should be obtained as a matter of prudent practice and documented in the CMP payment file.
It is important to note that the $14,500,000 CMP is separate from and in addition to the $42,500,000 board-approved remediation budget that BRB is in the process of establishing pursuant to the Consent Order's remediation requirements. The total combined financial outlay associated with the Consent Order, including the CMP and the remediation budget, is $57,000,000. This total amount should be considered in BRB's financial planning and board reporting on Consent Order compliance costs.
IV. ACCOUNTING AND FINANCIAL REPORTING TREATMENT
A. Expense Recognition
The CMP of $14,500,000 should be recorded as a regulatory penalty expense in BRB's financial statements. The appropriate accounting treatment is governed by ASC 450 (Contingencies), which requires that a loss contingency be accrued when (i) it is probable that a liability has been incurred as of the financial reporting date and (ii) the amount of the loss can be reasonably estimated.
The critical question for purposes of financial reporting is the timing of recognition — specifically, whether the CMP liability should be reflected in BRFG's Q4 2024 / FY 2024 financial statements (with a reporting date of December 31, 2024) or whether it should first be recognized in Q1 2025.
The Consent Order was formally issued on January 15, 2025, which is subsequent to the December 31, 2024 reporting date. However, if the negotiations between BRB and the OCC had progressed to a point, on or before December 31, 2024, at which the imposition of a CMP of approximately $14,500,000 was both probable and reasonably estimable, then the liability should have been accrued in BRB's financial statements as of December 31, 2024, under ASC 450-20-25. C&H understands that substantive negotiations regarding the CMP amount were concluded in December 2024, and that BRB and the OCC had reached an agreement in principle on the $14,500,000 amount prior to year-end, although the formal Consent Order was not executed until January 15, 2025.
If the liability was not accrued as of December 31, 2024, the issuance of the Consent Order on January 15, 2025 constitutes a subsequent event under ASC 855 (Subsequent Events) that must be evaluated as either a recognized subsequent event (Type I) or a non-recognized subsequent event (Type II). If the conditions for accrual (probability and reasonable estimability) existed as of December 31, 2024, the event is a recognized subsequent event, and the liability should be recorded in the December 31, 2024 financial statements. If the conditions for accrual did not exist until after December 31, 2024, the CMP should be disclosed as a non-recognized subsequent event in the notes to the December 31, 2024 financial statements and accrued in Q1 2025.
Recommendation: BRB's external auditor, Caldera & Pope LLP (engagement partner: Franklin Dorsey), should be consulted promptly regarding the appropriate period of recognition and the required disclosure treatment in BRFG's FY 2024 financial statements. Given the significance of the CMP amount and the sensitivity of the Consent Order, C&H recommends that this consultation occur no later than February 28, 2025, to ensure alignment between BRB, BRFG, and the external auditor in advance of the FY 2024 annual report filing.
B. Balance Sheet and Income Statement Impact
The CMP will have the following impact on BRB's financial statements:
Income Statement: The $14,500,000 CMP will reduce pre-tax income by $14,500,000 in the applicable accounting period (either Q4 2024 / FY 2024 or Q1 2025, depending on the period of recognition as discussed above). Because the CMP is non-deductible for federal income tax purposes (as discussed in Section V below), the expense will not generate a corresponding tax benefit, and the after-tax impact will also be $14,500,000.
Balance Sheet: Upon accrual, BRB should record a current liability on its balance sheet, classified as a "Regulatory Penalty Payable" or similar designation, in the amount of $14,500,000. This liability will remain on the balance sheet until the wire transfer is settled and the funds are received by the U.S. Treasury, at which point the liability is extinguished and the corresponding cash balance is reduced.
Classification: For purposes of internal management reporting and segment analysis, the CMP expense should be classified as a non-operating or non-recurring regulatory expense. This classification will facilitate the presentation of adjusted operating results that exclude the one-time impact of the penalty, which is relevant for management's analysis of BRB's core operating performance, as well as for communications with investors and analysts. BRB should ensure that any non-GAAP financial measures used in earnings releases or investor presentations that adjust for the CMP are presented in compliance with SEC Regulation G and Item 10(e) of Regulation S-K.
C. Public Company Disclosure Considerations
BRFG (NYSE: BRFG) is a publicly traded bank holding company and is subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended. The Consent Order and the CMP have material disclosure implications that must be carefully managed.
BRFG publicly disclosed the Consent Order on January 16, 2025, the business day following issuance. Following the disclosure, BRFG's stock price declined from an implied pre-disclosure level of approximately $47.82 per share to $41.15 per share, representing a decline of approximately $6.67 per share or 13.9%. This market reaction underscores the materiality of the Consent Order and the CMP to BRFG's investors.
The CMP amount and its financial impact should be disclosed in the following SEC filings, to the extent not already addressed:
(i) Form 8-K: If BRFG has not already filed a Form 8-K disclosing the specific CMP amount and payment terms, a filing should be made promptly. C&H understands that the January 16, 2025 disclosure included the CMP amount, but BRB's legal department should confirm the completeness of the Form 8-K disclosure.
(ii) Form 10-K for FY 2024: The CMP and the Consent Order should be discussed in the "Legal Proceedings" section (Item 3), the "Risk Factors" section (Item 1A), and the notes to the consolidated financial statements. The financial impact of the CMP — both the accrued liability and the income statement charge — should be reflected in the financial statements and accompanying Management's Discussion and Analysis ("MD&A").
(iii) Form 10-Q for subsequent quarterly periods: The status of the CMP payment and the ongoing remediation program should be updated in each subsequent quarterly filing until the Consent Order is terminated.
A separate C&H memorandum on BRFG's securities disclosure obligations (dated January 22, 2025) addresses the materiality analysis of the $57,000,000 total remediation outlay (CMP plus remediation budget) in the context of BRFG's $412 million net income and approximately $8.58 billion market capitalization (based on approximately 179.5 million shares outstanding at $47.82 per share prior to the disclosure). BRB and BRFG should coordinate closely with Caldera & Pope LLP to ensure that the auditor is comfortable with the disclosure treatment and that the financial statements are presented fairly in all material respects.
V. FEDERAL TAX TREATMENT
A. Non-Deductibility Under 26 U.S.C. § 162(f)
The $14,500,000 CMP is a penalty paid to a government entity — specifically, to the United States Treasury, as directed by the OCC — for violations of law. The federal income tax treatment of such payments is governed by 26 U.S.C. § 162(f), which was substantially amended by the Tax Cuts and Jobs Act of 2017 (Pub. L. No. 115-97, § 13306) and is implemented by Treasury Regulation § 1.162-21.
Under 26 U.S.C. § 162(f)(1), as currently in effect:
"No deduction shall be allowed under subsection (a) for any amount paid or incurred (whether by suit, agreement, or otherwise) to, or at the direction of, a government or governmental entity in relation to the violation of any law or the investigation or inquiry by such government or entity into the potential violation of any law."
The CMP assessed under Consent Order No. OCC-2025-003 squarely falls within the scope of this prohibition. The penalty was assessed by the OCC, a bureau of the United States Department of the Treasury and a government entity within the meaning of § 162(f), in connection with BRB's violations of the Bank Secrecy Act (31 U.S.C. § 5311 et seq.) and its implementing regulations. The CMP is payable to the United States Treasury. The payment is being made pursuant to a consent order that constitutes a settlement of the OCC's enforcement action, and thus falls within the statutory phrase "whether by suit, agreement, or otherwise."
Accordingly, BRB may not deduct the $14,500,000 CMP on its federal income tax return. The full amount of the CMP represents an after-tax cost to BRB, which has significant implications for BRB's financial projections, internal performance metrics, and board reporting on the total cost of the Consent Order.
B. Exception Analysis — Restitution / Remediation
Section 162(f)(2)(A) provides a limited exception to the general rule of non-deductibility for amounts that constitute restitution (including remediation of property) or amounts paid to come into compliance with a law that was violated, or amounts paid pursuant to a court order that are not penalties. To qualify for this exception, the court order or settlement agreement must specifically identify the amount as restitution, remediation, or compliance and must establish that the amount was paid for one of these permissible purposes.
The CMP does not qualify for this exception. The Consent Order clearly and unambiguously designates the $14,500,000 as a "civil money penalty" assessed under 12 U.S.C. § 1818(i)(2). The CMP is not characterized as restitution, remediation, or a compliance payment. There is no allocation within the Consent Order that separates any portion of the $14,500,000 into a deductible category. The penalty is punitive in nature and is intended to serve as a deterrent, not as a measure of restitution or remediation.
It is important to distinguish the CMP from BRB's separate remediation costs. The $42,500,000 remediation budget authorized under the Consent Order encompasses expenditures for technology system upgrades, additional compliance staffing, third-party consulting fees (including the engagement of Thornfield Consulting Group LLC), transaction monitoring system enhancements, training programs, and other compliance infrastructure improvements. These remediation expenditures are not part of the CMP and should be analyzed separately for tax deductibility. As a general matter, remediation costs that are ordinary and necessary business expenses incurred in the course of BRB's banking operations are deductible under 26 U.S.C. § 162(a), subject to capitalization rules under § 263 for amounts that constitute improvements to property or create long-lived assets. BRB should consult with its tax advisors regarding the specific deductibility of each category of remediation expenditure.
C. State Tax Implications
New York State generally conforms to the federal treatment of penalties and fines for purposes of computing the corporate franchise tax under Article 9-A of the New York Tax Law. Accordingly, the $14,500,000 CMP is expected to be non-deductible for New York State corporate franchise tax purposes as well. BRB should confirm this treatment with its state tax advisors, particularly with respect to any New York State-specific rules or administrative guidance that may affect the analysis.
In addition, BRB should consider the implications in other state and local jurisdictions in which BRB has nexus and files income or franchise tax returns. The treatment of government-imposed penalties varies by state. Some states conform to the federal IRC § 162(f) disallowance, while others may have independent provisions governing the deductibility of fines and penalties. BRB's state tax advisors should conduct a jurisdiction-by-jurisdiction analysis to determine the CMP's deductibility (or non-deductibility) in each relevant jurisdiction.
D. IRS Reporting Obligations
Under 26 U.S.C. § 6050X, as enacted by the Tax Cuts and Jobs Act of 2017, government entities that receive payments in excess of $600 in connection with a suit, agreement, or order relating to a violation of law (or the investigation or inquiry into a potential violation of law) are required to file an information return with the Internal Revenue Service. This reporting obligation applies to the OCC/U.S. Treasury with respect to the $14,500,000 CMP. The government entity is required to report the total amount of the payment and the amount of the payment that constitutes restitution or remediation (if any), as well as the amount that constitutes a non-deductible penalty or fine.
BRB should anticipate that the OCC/U.S. Treasury will file the required information return and that the IRS will have a record of the CMP payment. BRB's tax department should ensure that the treatment of the CMP on BRB's federal income tax return is consistent with the information reported by the government.
Recommendation: BRB's tax department, coordinating with Samantha Reeves, CFO, should be promptly notified of the non-deductibility of the CMP for purposes of:
(i) preparing BRB's FY 2025 federal income tax return (the CMP will be paid in the 2025 tax year);
(ii) computing estimated federal and state income tax payments for 2025, ensuring that BRB does not inadvertently claim a deduction for the CMP in its estimated tax calculations; and
(iii) updating BRB's internal financial projections and board-level reporting on the total after-tax cost of the Consent Order, recognizing that the CMP carries no tax benefit and the full $14,500,000 flows through to after-tax income.
The after-tax cost of the CMP is effectively $14,500,000 — the same as the pre-tax amount — because no deduction or tax benefit is available. This should be clearly communicated in BRB's internal financial reporting and in any presentations to the Board of Directors or Audit Committee regarding the financial impact of the Consent Order.
VI. CONFIRMATION AND DOCUMENTATION PROCEDURES WITH THE OCC
Maintaining a clear and well-documented record of the CMP payment process is essential for demonstrating compliance with the Consent Order. C&H recommends the following procedures for pre-payment notification, wire confirmation, post-payment confirmation, and OCC acknowledgment.
A. Pre-Payment Notification
C&H recommends that BRB send a written notice to the OCC Northeastern District Office at least five (5) business days prior to the anticipated wire transmission date, confirming the following:
(i) BRB's intent to remit the $14,500,000 CMP in full satisfaction of the penalty obligation under Consent Order No. OCC-2025-003;
(ii) the anticipated date of the wire transfer;
(iii) the originating bank and account details from which the wire will be initiated; and
(iv) the reference information that will accompany the wire (Consent Order number, OCC Charter Number, EIN, and payment notation).
The pre-payment notification should be addressed to Jonathan Frey, National Bank Examiner, at the OCC Northeastern District Office, 340 Madison Avenue, New York, New York 10017, and should be sent by both electronic mail and overnight courier to ensure timely receipt. If the wire is targeted for transmission on March 13, 2025, the pre-payment notification should be sent no later than March 7, 2025 (five business days prior). C&H will prepare a draft of this notification for Gregory Nardone's review and approval.
B. Wire Confirmation
Upon execution of the wire transfer, BRB should immediately obtain a wire confirmation receipt from its treasury operations team. The wire confirmation receipt should include, at a minimum, the following information:
(i) the Federal Reserve confirmation number (Fedwire IMAD or OMAD number);
(ii) the date and time of wire transmission;
(iii) the amount of the wire ($14,500,000);
(iv) the originating bank and account information;
(v) the beneficiary bank and account information (U.S. Treasury); and
(vi) the reference/message information included in the wire.
A copy of the wire confirmation receipt should be retained in BRB's records and promptly forwarded to C&H for inclusion in the engagement file (C&H Matter No. 1045-00002). The wire confirmation serves as the primary evidence that BRB timely transmitted the CMP payment.
C. Written Confirmation to OCC
Within two (2) business days of wire transmission, C&H will prepare and transmit a formal written confirmation letter to the OCC on behalf of BRB. The letter will be addressed to Jonathan Frey at the OCC Northeastern District Office (340 Madison Avenue, New York, New York 10017) and will confirm:
(i) that BRB has paid the $14,500,000 CMP in full;
(ii) the date of wire transmission;
(iii) the Federal Reserve confirmation number;
(iv) that the payment was made within the 60-day payment deadline under Consent Order No. OCC-2025-003; and
(v) that BRB considers the CMP obligation under the Consent Order to be fully satisfied upon receipt and crediting of the payment by the U.S. Treasury.
The letter will be transmitted by electronic mail and overnight courier, with a copy sent to the OCC's Washington headquarters (Enforcement & Compliance Division) as a courtesy. A copy of the confirmation letter will be maintained in C&H's matter file (1045-00002) and in BRB's internal compliance records.
D. OCC Acknowledgment
Following transmission of the confirmation letter, C&H will follow up with the OCC to obtain written acknowledgment of receipt of the CMP payment. This acknowledgment is important for several reasons:
(i) It provides definitive confirmation that the U.S. Treasury received and credited the $14,500,000 payment;
(ii) It constitutes documentary evidence that BRB satisfied the CMP obligation within the deadline established by the Consent Order;
(iii) It will be referenced in the compliance self-certification that BRB is required to submit to the OCC on or before February 15, 2026 (one year after the 30-day compliance plan submission deadline), demonstrating BRB's compliance with the terms of the Consent Order; and
(iv) It provides a clean record for BRB's internal audit and regulatory examination files.
C&H anticipates that the OCC may not issue a formal acknowledgment letter in all cases, and the agency's response time may vary. If the OCC does not provide written acknowledgment within ten (10) business days of the wire transmission, C&H will follow up by telephone and in writing to request confirmation.
E. Entry in OCC Correspondence Log
The following items should be logged in the OCC Correspondence Log & Tracking Memorandum maintained by C&H in connection with the Consent Order:
(i) The pre-payment notification to the OCC (date sent, method of delivery, recipient);
(ii) The wire confirmation receipt (date, amount, Federal Reserve confirmation number);
(iii) The formal written confirmation letter to the OCC (date sent, method of delivery, recipient);
(iv) The OCC acknowledgment of receipt (date received, substance of acknowledgment); and
(v) Any additional correspondence or communications with the OCC related to the CMP payment.
C&H associate Carlos Espinoza is responsible for maintaining the OCC Correspondence Log and will ensure that all CMP-related correspondence is logged promptly and accurately.
VII. INTERNAL APPROVAL AND AUTHORIZATION PROCEDURES
A. Board Authorization
The Board Resolution currently under development — which is expected to be adopted by the Board of Directors of BRB no later than February 28, 2025 — should expressly authorize the payment of the $14,500,000 CMP, in addition to acknowledging the Consent Order and authorizing the $42,500,000 remediation budget. C&H recommends that the Board Resolution include specific language along the following lines:
"RESOLVED, that the officers of the Bank are hereby authorized and directed to pay, on behalf of the Bank, the civil money penalty in the amount of $14,500,000 assessed pursuant to Consent Order No. OCC-2025-003, by wire transfer to the United States Treasury, in accordance with the payment instructions set forth in the Consent Order, on or before March 14, 2025."
If the Board Resolution has not yet been adopted as of the date on which BRB needs to initiate the wire transfer, BRB's existing delegated authority framework should be reviewed to confirm that the Chief Executive Officer (Diane Whitford) or the Chief Financial Officer (Samantha Reeves), in consultation with the General Counsel (Gregory Nardone), has sufficient authority to authorize a single disbursement of $14,500,000. BRB's bylaws, corporate governance guidelines, and any applicable board-delegated authority matrices should be examined for this purpose. C&H understands that BRB's delegated authority framework generally permits the CEO and CFO, acting jointly, to authorize expenditures up to $25 million without specific Board approval, but this should be confirmed with Gregory Nardone.
Recommendation: Regardless of whether the delegated authority framework would permit the CMP payment without specific Board action, C&H recommends obtaining explicit pre-authorization from either the full Board of Directors or the Audit Committee (chaired by Margaret Dao) for the CMP payment, given the significance of the amount, the regulatory context, and the importance of demonstrating robust corporate governance in connection with the Consent Order compliance process. Such pre-authorization can be obtained by written consent or at the next regularly scheduled Board or Audit Committee meeting, provided it occurs before the wire date.
B. Internal Sign-Off Chain
To ensure proper internal controls and a clear chain of authorization, C&H recommends the following approval sequence prior to initiation of the wire transfer:
1. Gregory Nardone, General Counsel & Corporate Secretary — Provides legal authorization and confirms that the CMP payment is required under the Consent Order, that the payment amount is correct, and that the wire instructions have been verified with the OCC. Signs off on the legal authorization memorandum.
2. Samantha Reeves, Chief Financial Officer — Provides funding authorization, confirms the accounting treatment and period of recognition, verifies that the originating account has sufficient immediately available funds, and approves the wire execution. Signs off on the wire transfer authorization form.
3. Diane Whitford, Chief Executive Officer — Provides executive authorization for the payment, confirming that the Board Resolution (or Audit Committee authorization) has been obtained or that the payment is within delegated authority. Signs off on the executive authorization.
4. Thomas Ikeda, BSA Officer — Provides acknowledgment of the CMP payment for BSA/AML compliance records, confirming that the payment relates to the BSA/AML-related Consent Order and that it has been noted in the BSA compliance documentation. This acknowledgment is for record-keeping purposes and does not constitute a separate approval authority.
Each signatory should execute the relevant authorization or acknowledgment form in writing (physical or electronic signature) prior to wire initiation. C&H can provide templates for the legal authorization memorandum and the wire transfer authorization form upon request.
C. Documentation Retention
All internal approvals, wire instructions, confirmation receipts, and OCC correspondence related to the CMP payment should be retained in a dedicated CMP payment subfolder within BRB's Consent Order compliance file. The file should be organized to include, at a minimum:
(i) The Board Resolution or Audit Committee authorization (or delegated authority documentation);
(ii) The internal sign-off chain documentation (legal authorization, funding authorization, executive authorization, BSA Officer acknowledgment);
(iii) The verified wire transfer instructions;
(iv) The wire transfer authorization form;
(v) The wire confirmation receipt (including Federal Reserve confirmation number);
(vi) The pre-payment notification to the OCC;
(vii) The formal written confirmation letter to the OCC;
(viii) The OCC acknowledgment of receipt;
(ix) Any additional OCC correspondence related to the CMP payment; and
(x) This memorandum and any supplemental legal advice provided by C&H.
Copies of the complete CMP payment file should be provided to the following parties:
• Philip Hartmann, Calderwood & Harkness LLP — for the C&H engagement file (Matter No. 1045-00002);
• Dr. Vivian Castellano, Thornfield Consulting Group LLC — for the independent consultant's records, as the timely payment of the CMP will be relevant to the independent consultant's assessment of BRB's overall compliance with the Consent Order;
• Derek Ballard, Head of Internal Audit, BRB — for internal audit trail purposes, including documentation supporting BRB's compliance with the Consent Order for future regulatory examinations and internal audit reviews.
VIII. ACTION ITEMS AND TIMELINE SUMMARY
The following table summarizes the key action items, responsible parties, and target dates for the CMP payment process:
C&H will monitor the timeline and provide reminders as key dates approach. BRB should designate a single point of contact within the Treasury operations team to coordinate with C&H on the wire transfer logistics.
IX. CONCLUSION
Timely payment of the $14,500,000 civil money penalty by March 16, 2025 is a mandatory and non-negotiable obligation under Consent Order No. OCC-2025-003. Failure to remit the full penalty amount within the prescribed timeframe could expose BRB to additional civil money penalties under 12 U.S.C. § 1818(i)(2), adverse supervisory action by the OCC, potential referral to the Department of Justice, and significant reputational harm.
C&H recommends completing the wire transfer no later than March 13–14, 2025, to ensure that the funds are settled and credited by the U.S. Treasury before the March 16 deadline, accounting for the fact that March 16 falls on a Sunday and for potential Federal Reserve wire processing considerations. Initiating the wire on March 13, 2025 is the preferred course of action, as it provides one full business day of buffer for any unforeseen settlement delays.
The CMP is non-deductible for federal and state income tax purposes under 26 U.S.C. § 162(f), and the full $14,500,000 represents an after-tax cost to BRB. This non-deductibility should be reflected in BRB's tax planning, estimated tax payment calculations, and internal financial projections.
BRB should coordinate internally among the General Counsel's office (Gregory Nardone), the CFO's office (Samantha Reeves), Treasury operations, and the BSA Officer (Thomas Ikeda) to ensure smooth and orderly execution of the payment. Meticulous documentation should be maintained at every stage of the process — from Board authorization through wire confirmation through OCC acknowledgment — for Consent Order compliance purposes and future regulatory examination readiness.
C&H stands ready to assist with the preparation and transmission of the pre-payment notification to the OCC, the formal written confirmation letter following wire transmission, follow-up correspondence with the OCC to obtain acknowledgment of receipt, and any other aspects of the CMP payment process that require legal coordination.
Questions regarding this memorandum or the CMP payment logistics should be directed to:
Philip Hartmann, Partner — (212) 848-6100 or phartmann@calderwoodharkness.com
Yuki Nakamura, Associate — (212) 848-6247 or ynakamura@calderwoodharkness.com
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________