California Pacific Bank v. FDIC, No. 16-70725 (9th Cir. 2018)
Annotate this CaseCalifornia Pacific Bank petitioned for review, challenging the constitutionality of the Banking Secrecy Act (BSA), 31 U.S.C. 5311-5330, and its implementing regulations, and alleged that the FDIC Board of Directors' decision, which found that the Bank violated the BSA and ordered it to implement a plan to bring the Bank into compliance, was not supported by substantial evidence. The Ninth Circuit denied the petition for review, holding that the Bank did not waive its constitutional challenges; the BSA and its implementing regulations were not unconstitutionally vague; neither the FDIC's investigation nor the ALJ was unconstitutionally biased against the Bank; the FDIC acted in accordance with the law by relying on the Federal Financial Institutions Examination Council Manual to clarify its four pillars regulation; and the FDIC Board's decisions were supported by substantial evidence.
Court Description: Federal Deposit Insurance Corporation /. Bank Secrecy Act The panel denied a petition for review brought by California Pacific Bank, challenging the constitutionality of the Bank Secrecy Act (“BSA”) and its implementing regulations, and alleging that the Federal Deposit Insurance Corporation Board of Directors’ decision – finding that the Bank violated the BSA and ordering the Bank to implement a plan to bring the Bank into compliance – was not supported by substantial evidence. The FDIC Board concluded that the Bank did not comply with the BSA’s implementing regulations because it failed to establish and maintain procedures designed to ensure adequate internal controls, independent testing, administration, and training – the “four pillars.” As a preliminary matter, the panel held that the Bank preserved its constitutional challenges, and they were not waived. The panel held that the BSA and its implementing regulations were not unconstitutionally vague, and the FDIC and the administrative law judge did not exhibit unconstitutional bias against the Bank. The panel further held that the FDIC acted in accordance with the law by relying on the Federal Financial Institutions Examination Council Manual to clarify its four pillars regulation. The CALIFORNIA PACIFIC BANK V. FDIC 3 panel also held that substantial evidence supported the FDIC Board’s decisions that the Bank failed to comply with the four pillars and that the Bank failed to file a suspicious activity report, where one was needed, and thus, that the Bank did not comply with the BSA.
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