​Sterling Bank fined $6M by OCC over loan program lapses

The OCC’s penalty, announced Tuesday, coincided with the termination of a June 2019 agreement between the regulator and Sterling Bank requiring the latter to remediate its unsafe and unsound practices, including deficiencies in its Bank Secrecy Act/anti-money laundering (BSA/AML) internal controls. The OCC determined the bank implemented all corrective actions required by the agreement.

Sterling Bank will pay its penalty to the U.S. Treasury Department.

The details: From 2011 through December 2019, Sterling Bank’s residential loan program, “Advantage Loan Program,” served as the bank’s primary loan product. The program was marred by fraudulent loan applications, falsified applicant information, and disclosure failures regarding the use of third-party mortgage brokers, the OCC said, all issues Sterling Bank failed to address as the program grew.

During the period, Sterling Bank “failed to implement an adequate system of BSA/AML internal controls and failed to file suspicious activity reports in a timely manner,” the OCC found. The regulator provided no further information on the AML deficiencies.

In response to the June 2019 agreement, Sterling Bank investigated the regulator’s findings and acted to remedy the alleged practices. The OCC acknowledged these actions in assessing its penalty.

“Today’s announcement from the OCC represents a painful resolution of the long-running regulatory fallout from the ill-fated Advantage Loan Program,” said Thomas O’Brien, chairman, president, and chief executive of Sterling Bank, in a press release. “The level of cooperation that we have provided and the comprehensive internal investigation have been critical to our building a reputation with our regulators that had been absent previously. … The $6 million civil money penalty, while significant, is a clear reflection of our extraordinary cooperation and remediation efforts and represents another significant milestone in putting these legacy issues behind us.”

Sterling Bank remains under investigation by the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) regarding its scrapped loan program.

“At this point in time, we have no visibility into the potential terms or timing of any settlement with the DOJ,” O’Brien said. “We will continue to provide full cooperation and hope resolution with Sterling will be forthcoming.”

O’Brien, hired to lead the bank in June 2020, offered no update on the SEC probe but said it was “possible that the issues surrounding multiple individuals regarding their involvement with the fraud will continue well into the future.” A former managing director and two former loan officers at the bank pleaded guilty in May 2021 to originating fraudulent residential mortgage loans through the program.