Federal regulators have slapped California's First Mountain Bank with a cease-and-desist order for failing to comply with a law aimed at stopping money laundering schemes.
The June 15 order, made public in late July by the Federal Deposit Insurance Corp., directed the Big Bear Lake bank to devise and test systems for detecting and reporting cash transactions that exceed $10,000 in any one day, as required by the Bank Secrecy Act.
First Mountain, which has $74 million of assets, violated the FDIC rule requiring a bank to provide independent testing of its ability to track these large cash transfers.
The FDIC would not say whether the bank had complied with the order by a July 15 deadline.
In addition to coming up with a plan, the bank was ordered to give the FDIC regional director's office written progress reports within 30 days of each quarter, until the order is lifted.
Dennis L. Shollenburg, president and chief executive officer of First Mountain, did not return phone calls seeking comment.
The FDIC issued two other cease-and-desist orders in June, to Bankers Trust of Madison (Ala.) and to Commercial State Bank, Andrews, Tex.
Bankers Trust was cited for not taking steps necessary to make sure it will avoid computer glitches in 2000. The $38 million-asset bank also was found to be operating with an excessive volume of bad loans and engaging in practices that produced excessive loan losses. No details of these practices were given.
As a consequence, the bank was ordered to develop a plan-to be approved by the bank's board and the FDIC-to assess, renovate, and test all bank information systems.
The bank also was instructed to "find and retain qualified management." A spokesman for Bankers Trust declined to comment on the order, though a receptionist at the bank confirmed that former president Gregory E. Smith has recently been replaced by Harry Rice, a senior vice president.
The past few years have been rough ones at Bankers Trust. Its total assets are down 38% since peaking at $63 million at the end of 1994. It posted a minus-35.83% return on equity at Dec. 31, 1997, according to FDIC information.
The spokesman said the poor performance stems from the bank's high level of bad loans.
Commercial State was flagged for operating with management whose "policies and practices are detrimental to the bank and jeopardize the safety of its deposits."
Management of the $40 million-asset bank was "hazardous" in its lending and "ineffective and lax" in its collection practices, the order stated. The bank also renewed credits without proper documentation.
Rusty Bristow, a vice president at Commercial State, declined to comment on the FDIC order.