Oritani Financial in Township of Washington, N.J., is operating under an informal agreement with regulators tied to its Bank Secrecy Act and anti-money-laundering compliance.
The $4.1 billion-asset company said in its quarterly filing with the Securities and Exchange Commission that its bank entered into the agreement in December with the Federal Deposit Insurance Corp. and the New Jersey Department of Banking and Insurance.
As part of the agreement, Oritani must develop and implement a system of internal controls to ensure full BSA compliance. The bank also agreed to conduct a “comprehensive system validation” of the how it complies with the BSA and anti-money-laundering rules.
Oritani also agreed to review its BSA staffing needs annually. It will also review transactions and accounts within a specific time period for BSA and AML compliance, and provide regulators with quarterly progress reports.
“Numerous actions have been taken or initiated by the bank to strengthen its BSA and AML compliance practices, policies, procedures and controls, and to enhance staffing in this area,” the filing said. “The bank believes that it will be able to demonstrate substantial compliance with the terms of the informal agreement.”
If the company fails to comply, regulators could take more action. The filing said it did not know how much the agreement would cost Oritani.
“Generally, the primary issue with these agreements is the ability to conduct M&A and new branching,” Frank Schiraldi, an analyst at Sandler O’Neill, wrote in a Feb. 12 note to clients. “With no M&A deals having been announced recently, we believe the agreement has less near-term implications for [Oritani] than it has had for other institutions.”
Schiraldi said it is unclear how the agreement will affect Oritani’s prospects of selling to another company, adding that costs associated with compliance will likely increase the company's Oritani’s efficiency ratio. Schiraldi said Oritani has managed expenses well recently, with an efficiency ratio in the 30%-40% range.
“One clear point we can make is that there is no issue with capital return,” Schiraldi wrote.