Gregory,
I wanted to reach out on the first day of this engagement to set out the critical path items that will require our collective attention over the coming weeks. There is a good deal to cover, so I have organized this email around the immediate action items and near-term deliverables. A more detailed roadmap will follow shortly.
**1. Engagement Confirmation**
As of today, Calderwood & Harkness LLP's engagement as outside regulatory counsel to Belmont Ridge Bank National Association is effective pursuant to the executed engagement letter (C&H Matter No. 1045-00002). As a housekeeping matter, I would ask that you arrange for the $500,000 evergreen retainer wire to C&H's client trust account at your earliest convenience; the wire details are set forth in Exhibit B to the engagement letter.
As you know, the scope of our engagement encompasses a comprehensive BSA/AML and sanctions compliance-program uplift in response to OCC Consent Order No. OCC-2025-003, issued January 15, 2025. Our core team will consist of the following:
- **Philip Hartmann** — Responsible Partner - **Marcus Delgado** — Billing Partner (cross-staffed for fintech patent/licensing compliance matters arising from BRB's Banking-as-a-Service arrangements) - **Yuki Nakamura** — Lead Associate - **Carlos Espinoza** — Working Associate
**2. Consent Order — Context**
I will not belabor the background here, as you and Patricia are well acquainted with the Order's provisions. Suffice it to say that BRB is operating under a Consent Order with tight and sequenced deadlines, and the actions outlined below represent the near-term critical path items requiring immediate attention from BRB management and the Board over the next several weeks.
We are separately preparing a detailed **Consent Order Analysis Memorandum** (attorney-client privileged and work-product protected) that will provide an article-by-article breakdown with full legal analysis. We will have that to you shortly.
**3. Immediate Action Items**
**Action Item 1: Board Resolution — Due February 28, 2025**
The Consent Order requires the Belmont Ridge Financial Group Board of Directors to adopt a resolution within 45 days of the Order's effective date, which gives us a deadline of **February 28, 2025**. The resolution must (a) formally acknowledge the Consent Order, (b) establish a dedicated Compliance Committee of the Board (the absence of which was cited as a deficiency), and (c) authorize the remediation program and associated budget.
C&H will circulate a **draft Board Resolution** and **draft Compliance Committee Charter** for your and the Board's review within the next several days. Consistent with what I understand the Board is contemplating, we would recommend James Rutherford as Compliance Committee Chair. The charter should provide for a monthly meeting cadence during the active remediation period — the OCC will expect to see that level of engagement.
I would also recommend that the resolution formally authorize the **$42.5 million remediation budget** (exclusive of the civil money penalty). An express budgetary authorization demonstrates the seriousness of the Board's commitment and oversight posture to the OCC. This is not merely symbolic — it is the type of concrete action examiners look for when assessing remedial progress.
**Action Item 2: Civil Money Penalty Payment — Due March 16, 2025**
The **$14.5 million CMP** is due within 60 days of the Consent Order's effective date, i.e., **March 16, 2025**. I would ask that you coordinate with Samantha Reeves to ensure wire logistics are in place well in advance of that date — we do not want any administrative delay to create even the appearance of non-compliance.
C&H will prepare a short memorandum on CMP payment logistics, including wire instructions to the U.S. Treasury, accounting treatment considerations, and the tax non-deductibility of the penalty.
**Action Item 3: Independent Consultant — Thornfield On-Site Assessment Commencing March 1, 2025**
As you are aware, the OCC's non-objection to Thornfield Consulting Group LLC was received on February 5, 2025, and the Thornfield engagement agreement (Ref: TCG-BRB-2025-001) was executed today — a fixed fee of $6.5 million for a 12-month engagement, plus expenses capped at $400,000.
Thornfield's on-site assessment, led by Dr. Vivian Castellano, is scheduled to commence **March 1, 2025**. In advance of that date, C&H is finalizing an **Access & Cooperation Protocol** that will govern Thornfield's access to BRB systems, personnel, and records. We will circulate a draft to Patricia Langston, Thomas Ikeda, Linda Petrosian, and Warren Ashby for input, as their departments will be most directly involved.
Two additional notes on Thornfield:
- Thornfield's **preliminary gap assessment** is due to the OCC by **April 15, 2025**. We will want to be well prepared for that. - C&H will serve as the primary liaison between BRB and Thornfield and will establish a bi-weekly status call cadence to ensure alignment and manage privilege considerations.
**Action Item 4: Interim SAR Backlog Status Report — Due March 31, 2025**
The Consent Order requires BRB to submit an interim status report to the OCC on the SAR backlog — approximately 2,400 unreviewed alerts as of the September 2024 examination date — by **March 31, 2025**.
Yuki Nakamura will be leading the SAR workstream and will be reaching out to Thomas Ikeda this week to begin developing a triage protocol and workplan. The deployment of Pinnacle Compliance Solutions' 30 temporary FTE analysts should be accelerated to the greatest extent possible. Gregory, could you please confirm that the Pinnacle managed services agreement (SOW Ref: PCS-BRB-2025-0012) is fully executed so that staffing can begin ramping immediately? Time is of the essence here — the March 31 report will need to show meaningful progress, not merely a plan.
**Action Item 5: OCC Acknowledgment Letter**
C&H will prepare a formal letter on BRB's behalf to Jonathan Frey, National Bank Examiner, OCC Northeastern District Office, acknowledging receipt of the Consent Order and confirming BRB's intent to comply with all provisions and deadlines. We will circulate a draft for your review before submission.
**4. Comprehensive Remediation Action Plan — Due May 15, 2025**
I want to flag the most significant near-term deliverable: the **Comprehensive Remediation Action Plan (RAP)**, which is due to the OCC by **May 15, 2025**. This is the culmination of Phase 1 of our engagement and represents BRB's opportunity to demonstrate to the OCC that the Bank has developed a credible, detailed, and adequately resourced remediation program.
The RAP must address all five core deficiency categories identified in the Consent Order:
1. **OFAC sanctions screening** — including the screening gap affecting approximately 12% of NovaPay transactions routed through the BaaS platform; 2. **SAR filing deficiencies** — the backlog and systemic underreporting; 3. **CDD/EDD failures** — across the approximately 47,000 accounts classified as high-risk; 4. **Transaction monitoring model validation** — the Veridian TMS v.8.3 platform, last validated in March 2021; and 5. **Board-level oversight** — governance, reporting, and escalation structures.
C&H will begin developing detailed workstream plans for each area over the coming weeks. I would like to schedule a **kickoff working session** with BRB's core team in the next week or so. The right participants from BRB's side would include Patricia Langston (CCO), Thomas Ikeda (BSA Officer), Melissa Chu (CRO), Warren Ashby (BaaS), and Linda Petrosian (CIO/CTO). Yuki will follow up to coordinate scheduling.
**5. Privilege and Confidentiality Protocols**
C&H is preparing a **Privilege Protocol Memorandum** that will govern all communications and documents generated during the remediation. I want to underscore the importance of maintaining attorney-client privilege and work-product protections throughout this engagement. This is particularly critical given (a) FinCEN's reservation of independent enforcement rights, and (b) Thornfield's role as an independent consultant that reports directly to the OCC — Thornfield is not within the privilege, and communications with Thornfield must be carefully managed.
In the interim, I would ask that all BRB personnel involved in the remediation be reminded to mark privileged communications appropriately (using the designation "PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION") and to route substantive communications through or copy C&H as appropriate. We will distribute formal guidance once the protocol is finalized.
**6. Near-Term Deliverables from C&H**
Over the next one to two weeks, you should expect the following from our team:
- Draft Board Resolution and Compliance Committee Charter - Consent Order Analysis Memorandum (privileged) - Annotated Summary of Consent Order Provisions (deadline calendar) - CMP Payment Logistics Memorandum - Privilege Protocol Memorandum - Access & Cooperation Protocol for Thornfield engagement - OCC Acknowledgment Letter (draft for review) - Regulatory Risk Assessment (addressing FinCEN, DOJ referral risk, and OFAC enforcement exposure)
**7. Closing**
Gregory, Calderwood & Harkness is fully committed to helping BRB navigate this remediation efficiently and thoroughly. The deadlines are tight, but they are achievable with disciplined execution and strong coordination between our teams. I am confident we will build a productive working rhythm quickly.
Please do not hesitate to call me directly if you have any questions or want to discuss priorities. I would suggest we schedule a call later this week — Thursday or Friday — among the three of us (you, Patricia, and me) to align on the workplan for the first two weeks and ensure we are all oriented to the same sequencing.
I look forward to working with you and the entire BRB team.
Best regards,
**Philip Hartmann** Partner, Banking & Finance Calderwood & Harkness LLP 1285 Avenue of the Americas, 40th Floor New York, NY 10019 T: (212) 554-7200
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