The Federal Reserve issued an
In an enforcement action released this week, the Fed said it identified consumer compliance deficiencies at Lynnwood, Washington-based UniBank earlier this year. As a result of the citation, the bank and its holding company, U & I Financial Corp., have pledged to make a host of management changes.
The bank has agreed to review and amend its policies and practices related to consumer compliance; lending administration and risk management; loan grading and review; credit loss allowances; and conflicts of interest, among other things.
The written agreement between the bank and its supervisors was struck on Monday and made public on Thursday. As is typical for such arrangements, the specific shortcomings at the bank were not disclosed in the document.
In June, UniBank and U & I Financial were both named in a lawsuit filed in the Superior Court of Washington for Snohomish County over an alleged Ponzi scheme — an arrangement in which a perpetrator continually raises money from new investors and uses those funds to make payments to earlier investors to create the appearance of profitability.
The organizations were listed as defendants in the original filing on Aug. 1, but were dismissed from the case two weeks later. Another bank, Port Angeles, Washington-based First Fed Bank was also named as a defendant in the suit's initial filing but later dropped.
The plaintiffs in the case — companies and individuals who invested in WST, a firm that claimed to be involved in "water-vending manufacturing and distribution" — said the banks helped facilitate loans from investors to the company. Investors say they were told the loans would help finance the purchase of operating vending machines, but instead were used to support unrelated ventures, purchase land and enrich the company's CEO.
The original lawsuit also claimed that the banks incurred losses on the loans and were seeking to be made whole.
UniBank officials did not immediately return calls seeking comment on Thursday afternoon.
As part of its agreement with the Fed, UniBank is subject to a capital conservation arrangement, meaning it cannot declare or pay dividends, engage in share repurchases or make any other capital distribution without first getting written approval from its supervisors.
The bank has also agreed to address issues related to board oversight, capital planning, liquidity and fund management, and general compliance with laws and regulations.
