The Federal Reserve issued two enforcement actions this week: one against a Helena, Montana, bank for flood insurance violations, the other against a former banking employee in Jackson, Wyoming.
The actions were unrelated but were announced concurrently on Thursday.
First, the Fed cited Opportunity Bank of Montana for repeatedly violating the National Flood Insurance Act, which requires properties in designated flood zones to carry the insurance in order to be used as collateral for loans. The enforcement action came with a $31,000 civil penalty as a result of the bank's "pattern or practice of violations," the Fed said.
By law, the Fed can fine banks up to $2,000 per violation of Regulation H, the rule that implements the National Flood Insurance Act. Once the Fed collects the civil penalty from the bank, it will pass it along to the National Flood Insurance Program.
The enforcement action, which was executed on Monday, did not specify how or when Opportunity Bank flouted its requirements, as is typical of such public disclosures.
The bank consented to the action, meaning it neither admitted nor denied wrongdoing, but rather agreed to meet the terms of the order.
The Fed's second action was a cease and desist order against Lindsay Graves, a former employee and institution-affiliated party of the Bank of Jackson Hole, for mishandling confidential supervisory information, or CSI.
Graves worked for the bank between 2015 and 2019 as an information technology manager, overseeing the bank's IT department.
During her tenure, Graves made copies of more than 50,000 electronic documents at the request of another former bank employee, according to the enforcement disclosure. Some of those documents contained CSI, which is, by law, the property of the bank's supervising agency — in this case the Federal Reserve Board of Governors.
According to the Fed, Graves provided a copy of the material to both the other employee and his lawyer without authorization to do so from the bank or its regulator.
The document did not disclose what type of information was shared.
As a result of her agreement with the Fed, if Graves wishes to take another job in the banking sector, she will have to inform her future employer about the enforcement action and provide written notice to the Fed. She will also have to provide written documentation that she knows and will adhere to her compliance obligations in that new role.
Because of concerns over reputational damage and even financial stability — should its disclosure result in a bank run — CSI is imbued with strict protections. Individuals who share such information can be subject to civil penalties and even criminal prosecution.
Earlier this year, the Fed
Freeze, the former chief financial officer of the Bank of Jackson Hole, is suing the bank, claiming he released confidential documents to blow the whistle on misconduct by executives, according to a report from the Jackson Hole News & Guide.
