Blue Ridge Bank has found itself in regulatory crosshairs again, leading to a consent order with the Office of the Comptroller of the Currency issued last week.
Blue Ridge’s primary federal regulator deemed the bank in “troubled condition” after the fintech-focused bank’s alleged continuous failure to establish and maintain a strong and well-staffed Bank Secrecy Act/Anti-Money Laundering compliance program.
The OCC alleged that Blue Ridge’s BSA/AML program experienced systemic internal controls breakdowns and had weak independent testing, and that the bank failed to correct problems already called out within its BSA/AML program by the OCC in a regulatory action in September 2022.
As with the prior regulatory action, Blue Ridge is prohibited from starting up any new third-party fintech relationships or building upon ones already started without the permission of the OCC, and it must maintain a leverage ratio of 10% and a capital ratio of 13% — compared to well-capitalized standards of 5% and 10% — lest it be deemed undercapitalized.
But even with its higher leverage and capital ratio requirements, Blue Ridge cannot be deemed well-capitalized, under the consent order.
Among other things, the bank must also:
- Maintain a committee to monitor compliance with the order and regularly submit progress reports to the regulator
- Submit a written plan to the OCC detailing how it intends to achieve and sustain BSA/AML compliance
- Develop a written program to assess and manage risks posed by third-party relationships
- Develop a better risk-based program to ensure the bank, including accounts related to third party fintechs, meet compliance requirements in filing suspicious activity reports
- Develop a three-year strategic capital plan for achieving and maintaining capital no less than required by the order
An OCC spokesperson told Banking Dive it does not comment on enforcement actions or specific banks.
In connection to the issuance of the order, Blue Ridge neither admits or denies any of the OCC’s findings or charges, according to a Securities and Exchange Commission filing.
CEO Billy Beale told Banking Dive that the consent order “was issued based on the OCC’s June 2023 exam findings and is not reflective of the progress the bank had made since June 2023.”
The bank divulged plans in November to reduce its roughly 50 banking-as-a-service partnerships to a “limited number” of them, with “a commercial focus or strong consumer traction,” following regulatory scrutiny.
In December, Blue Ridge announced a $150 million capital raise in a private placement deal to comply with the bank’s minimum capital ratios and to support organic growth.
The capital raise is expected to close in March, Beale said, and the “additional capital should bring comfort to the markets and our depositors.”
