Valley National Bancorp in Wayne, N.J., included a disclaimer in its annual report hinting that sooner or later it could be hearing from regulators about its Bank Secrecy Act compliance.
Question is, why would the company do so when it is just as likely that it will have no bad news to report?
Valley's chief financial officer, Alan D. Eskow, said that given regulators' stepped-up enforcement of the Bank Secrecy Act and of laws against money laundering, it does not hurt to alert investors when an examination of its procedures has been completed. (Valley underwent its exam from the Office of the Comptroller of the Currency last summer but has yet to receive the results.)
Mr. Eskow said he is confident no violations will crop up. But if they do, he said, Valley does not want to appear to have been keeping investors in the dark.
"This is cautionary based on what's going on in the world right now," Mr. Eskow said.
Valley's disclosure is a sign of the times, observers say. Though few banks will warn investors about possible enforcement actions unless they see them coming, attorneys, analysts, and consultants interviewed say they expect more to follow Valley's lead.
The statement appeared in the $10.7 billion-asset company's 10-K filed last week with the Securities and Exchange Commission. It said that though Valley "believes that its polices and procedures with respect to combating money laundering were effective, it cannot provide assurance that at some point in the future, it will not face a regulatory action."
The statement went on to say that any enforcement action could affect its attempts to buy banks and thrifts or build branches - an important point since it has two deals pending and has been aggressively opening new branches.
The 10-K filing caught the attention of the local press. A headline in the Bergen Record last week read, "Valley National Braced for Review's Fallout."
But in an interview Friday, Mr. Eskow pointed out that the company used the same language in its third-quarter earnings report, and he said its anxiety has actually eased since then.
"People are making a bigger deal than they should be," he said.
Gerard S. Cassidy, an analyst with Royal Bank of Canada's RBC Capital Markets Corp., in Portland, Maine, said he would not be surprised if Valley signed an agreement with the OCC to improve its anti-laundering policies. But he quickly added that he would not view it negatively, because regulators are taking a harder look at all banks' laundering and Bank Secrecy Act programs.
Ken Proctor, the director of risk management at Brintech Inc. in New Smyrna Beach, Fla., said, "All the regulators have adopted a zero-tolerance policy with regard to money laundering."
Still, he sees the disclaimer as a warning of more trouble to come.
"I wouldn't think they would put that in their 10-K unless there is some indication that they have a problem," he said.
Gary Lax, a partner with Luse, Gorman, Pomerenk & Schick PC in Washington, said this type of notice would probably appear more often in filings from companies looking to make acquisitions.
"If you have an active transaction going on, and you have regulator in there" conducting an exam," he said, "I think that is good disclosure."
For its part, the OCC says it is trying to be reasonable with enforcement.
In a speech Friday at the Independent Community Bankers of America conference in San Antonio, Julie L. Williams, the acting comptroller of the currency, said that despite fears to the contrary the agency is not counting the number of suspicious-activity reports banks file, is not trying to force them out of any lines of business, and is not issuing summary cease-and-desist orders.
But that does not mean the OCC is taking violations lightly. Daniel P. Stipano, the agency's acting chief counsel, told the Florida International Bankers Association in February that Bank Secrecy Act compliance is "a matter that directly affects the national security of the United States.
"And, while most banks have always been willing partners when it comes to combating money laundering, it is clear that what was good enough in the past may not be good enough now," Mr. Stipano said.
That kind of talk can spook bankers, so they are erring on the side of caution, said John D. ReVeal, a partner at Powell Goldstein LLP in Washington.
"Banks are running scared between Sarbanes-Oxley and increased enforcement of the Bank Secrecy Act by regulators, and nobody knows what the rules are anymore," he said.
