Temporary Order to Cease and Desist  Doubles Building Society, LLC dba Small Financial Organization

Date:	07/02/2009
Organization:	Division of Banks
Docket Number:	2009-114
Location:	Worcester, MA

Doubles Building Society, LLC, d/b/a Small Financial Organization, Worcester, MA - Temporary Order to Cease and Desist

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
FOREIGN TRANSMITTAL
AGENCY LICENSING
Docket No. 2009-114

FINDINGS OF FACT AND TEMPORARY
ORDER TO CEASE AND DESIST

In the Matter of
DOUBLES BUILDING SOCIETY, LLC
d/b/a SMALL FINANCIAL ORGANIZATION
Worcester, Massachusetts

Foreign Transmittal Agency License Nos.
FT5741 and FT6557

The Commissioner of Banks ("Commissioner") having determined that DOUBLES BUILDING SOCIETY, LLC d/b/a SMALL FINANCIAL ORGANIZATION, located at 1078 West Boylston Street, Suite 204, Worcester, Massachusetts, ("Doubles Building Society" or the "Company") has engaged, or is engaged in, or is about to engage in, acts or practices constituting violations of Massachusetts General Laws chapter 169, and applicable regulations found at 209 CMR 44.00 et seq., hereby issues the following ORDER TO CEASE AND DESIST pursuant to General Laws chapter 169, section 13(b).

FINDINGS OF FACT

1. The Division of Banks ("Division"), through the Commissioner, has jurisdiction over the licensing and regulation of persons engaged in the business of a foreign transmittal agency pursuant to Massachusetts General Laws chapter 169.
2. Doubles Building Society is, and at all relevant times has been, a limited liability company conducting business in the Commonwealth of Massachusetts. Doubles Building Society's main office is located at 1078 West Boylston Street, Suite 204, Worcester, Massachusetts.
3. Bernard Kamiri is, and at all relevant times has been, the sole Member/Manager of Doubles Building Society.
4. Doubles Building Society is licensed by the Commissioner as a foreign transmittal agency under Massachusetts General Laws chapter 169. According to records maintained on file with the Division, the Commissioner initially issued a foreign transmittal license to Doubles Building Society on or about September 26, 2007, with license number FT5741. License number FT5741 authorizes Doubles Building Society to operate as a foreign transmittal agency at 1078 West Boylston Street, Worcester, Massachusetts.
5. Doubles Building Society maintains an additional licensed office location at 604 Central Street, Lowell Massachusetts, from which the Company conducts its foreign transmittal business.
6. Doubles Building Society is a money service business within the meaning of The Bank Secrecy Act ("BSA") and its implementing regulation at 31 C.F.R. Part 103 .
7. Pursuant to Massachusetts General Laws chapter 169, section 10, the Division conducted an inspection of the books, accounts, papers, records, and files of Doubles Building Society on January 23, 2009 (the "examination/inspection").
8. The Division's Report of Examination/Inspection (the "Report"), which was issued to Doubles Building Society on the effective date of this Temporary Order, presented the findings of the 2009 examination/inspection and alleged significant failures to comply with applicable state and federal laws, rules, and regulations governing the conduct of those engaged in the business of a foreign transmittal agency in Massachusetts.

   A. COMMINGLING FUNDS IN CLIENT TRUST ACCOUNTS

9. The Division's regulation 209 CMR 44.07 states, in part:

   (1) All funds of clients deposited with a Licensee for transmittal to a foreign country shall be deposited in one or more trust accounts maintained at a federally insured bank. Said account(s) shall contain only those funds collected for transmittal. . . . (4) No person licensed as a foreign transmittal agency shall commingle money collected for transmission abroad from clients with its own funds or use any part of a client's money in the conduct of the Licensee's business.

10. The Company maintains escrow accounts with three financial institutions. These three accounts hold funds collected for transmittal as well as fees paid to the Company by the consumer for the transmittal service. The examination/inspection revealed that Mr. Kamiri's personal funds were also deposited into one of these accounts. Moreover, a review of the account statements for this particular account for the period September, 2007 through January, 2009 revealed that the Company used the account to hold monies which were used to pay for the Company's operating expenses, including: rent; office supplies; utilities; and advertising.

    B. ENGAGING IN FOREIGN TRANSMITTAL BUSINESS IN MASSACHUSETTS FROM UNLICENSED LOCATIONS

11. Massachusetts General Laws chapter 169, section 6 states, in part:

    Each [foreign transmittal agency] license shall state the name and address of the licensee and the city or town of the place where such business is to be carried on. If a licensee intends to carry on a business at more than one location, such licensee shall procure a license for each location where such business shall be conducted.

12. The Division's regulation 209 CMR 44.09(1) states:

    A Licensee shall obtain a separate license under M.G.L. Chapter 169 and 209 CMR 44.00 in order to conduct business at another location.

13. The examination revealed that the Company conducted three transactions between July, 2008 and September, 2008 from Sunrise Boutique located at 286 West 6 ^th Street in Lowell. The Company failed to submit a license application, or obtain a license from the Division to conduct business from that location.
14. Books and records reviewed during the examination/inspection revealed that the Company conducted seven transactions between September, 2008 and December, 2008 from LP International located at 604 Central Street in Lowell. The Company failed to obtain a license to conduct business from that location until on or about April 8, 2009.

    C. Failure to Implement an Effective Anti-Money Laundering Program

15. The BSA's implementing regulation at 31 C.F.R. 103.125 states, in part:

    (a) Each money services business . . . shall develop, implement and maintain an effective anti-money laundering program . . . . that is reasonably designed to prevent the money services business from being used to facilitate money laundering and the financing of terrorist activities.

    (b) The program shall be commensurate with the risks posed by the location and size of, and the nature and volume of the financial services provided by, the money services business.

    (c) The program shall be in writing, and a money services business shall make copies of the anti-money laundering program available for inspection to the Department of the Treasury upon request…"

16. The BSA's implementing regulation at 31 C.F.R. 103.125(d) requires that money services businesses implement written anti-money laundering policies and procedures that, at a minimum: (1) incorporate policies and procedures and internal controls reasonably designed to assure compliance with this part, including requirements verifying customer identification, filing reports, creating and retaining records, and responding to law enforcement requests; (2) designate a person to assure day to day compliance with the program; (3) provide for education and/or training of appropriate personnel, including training in the detection of suspicious transactions; and (4) provide for independent review to monitor and maintain an adequate program.

    (i) Policies, Procedures and Internal Controls

17. The examination/inspection revealed that Doubles Building Society's policies, procedures, and internal controls were insufficient to maintain an effective anti-money laundering program and were not commensurate with the risks posed by the financial services offered by the Company, as specifically set forth below.
    1. Doubles Building Society's anti-money laundering manual does not include requirements for responding to law enforcement requests or for identifying transactions designed to evade reporting requirements that would require the filing of a Suspicious Activity Reports by Money Services Business ("SAR-MSB").
    2. The Company's procedures require that currency transaction reports ("CTRs") be filed for currency transactions equal to or exceeding $9,000, which is not in compliance with the BSA's implementing regulation at 31 C.F.R. 103.22(b)(1) which requires that CTRs be filed for transactions in currency of more than $10,000.
    3. A review of the Company's anti-money laundering manual revealed that the Company's written procedures for verifying customer identification are deficient because the procedures: are not sufficiently detailed; do not provide for the retention of customer identification or for the creation of customer profiles; and are not commensurate with the risks posed by the financial services provided by the Company, as more fully described in the Report. Moreover, discussions with Bernard Kamiri revealed that many of the procedures written into the Company's compliance manual regarding customer identification do not reflect actual practice.
    4. A review of Doubles Building Society's Company's anti-money laundering program revealed that record retention procedures are not adequate because the information retained by the Company can only be reviewed by transaction date and the database does not permit the Company to search transactions by individual customer.

    (ii) Designated Compliance Officer

18. The BSA's implementing regulation at 31 C.F.R. 103.125(d)(2) states, in part:

    [The money services business' anti-money laundering program shall] [d]esignate a person to assure day to day compliance with the program and this part. The responsibilities of such person shall include assuring that: (i) The money services business properly files reports, and creates and retains records, in accordance with applicable requirements of this part; (ii) The compliance program is updated as necessary to reflect current requirements of this part, and related guidance issued by the Department of the Treasury; and (iii) The money services business provides appropriate training and education in accordance with paragraph (d)(3) of this section.

19. Doubles Building Society has designated a compliance officer. However, the examination/inspection revealed that the compliance officer failed to effectively perform the required duties and appeared to lack the skills and knowledge necessary for that position. Specifically, as explained in more detail in this Temporary Order and in the Report, the compliance officer failed to ensure that the anti-money laundering program reflects the current requirements of the Bank Secrecy Act. Furthermore, the compliance officer has failed to properly file reports and provide appropriate training and education.

    (iii) Education and Training

20. The BSA's implementing regulation at 103 C.F.R. § 103.125(d)(3) states:

    [The money services business' anti-money laundering program shall] [p]rovide education and/or training of appropriate personnel concerning their responsibilities under the program, including training in the detection of suspicious transactions to the extent that the money services business is required to report such transactions under this part.

21. Doubles Building Society's training program requires appropriate personnel to read the compliance manual and take a compliance quiz. However, because the compliance manual is considered deficient, as further described above and in the Report, the training program is not considered to be adequate. Moreover, the Company failed to maintain documentation to support its training program.

    ( iv) Independent Review

22. The BSA's implementing regulation at 31 C.F.R. § 103.125(d)(4) states:

    [The money services business' anti-money laundering program shall] [p]rovide for independent review to monitor and maintain an adequate program. The scope and frequency of the review shall be commensurate with the risk of the financial services provided by the money services business. Such review may be conducted by an officer or employee of the money services business so long as the reviewer is not the person designated in paragraph (d)(2) of this section.

23. The examination/inspection revealed that Doubles Building Society has no procedures in place to provide for independent review of its anti-money laundering program. Upon inquiry, Bernard Kamiri informed the Division's examiners that the Company was not aware that such independent review was required.

    D. Failure to register with the Department of Treasury

24. The BSA's implementing regulation at 31 C.F.R. 103.41(a) (1) states, in part:

    Except as provided in paragraph (a)(2) of this section, relating to agents, each money services business (whether or not licensed as a money services business by any State must register with the Department of the Treasury and, as part of that registration, maintain a list of its agents as required by 31 U.S.C. 5330 and this section…

25. The BSA's implementing regulation at 31 C.F.R. 103. 41(b)(2) states, in part:

    A money services business must be registered for the initial registration period and each renewal period. The initial registration period is the two-calendar-year period beginning with the calendar year in which the money services business is first required to be registered…

26. The BSA's implementing regulation at 31 CFR 103.41(4) states, in part:

    [I]f a money service business experiences a more than 50-per cent increase in the number of its agents during any registration period, the money services business must be re-registered…

27. Books and records reviewed during the examination/inspection revealed that Doubles Building Society initially registered with the Department of Treasury on September 5, 2006. However, the Company failed to re-register at the end of the two-calendar-year registration period ending December 31, 2008. Furthermore, the Company failed to re-register with the Department of Treasury when the Company began to utilize a more than 50-percent increase in its number of agents to accept deposits for foreign transmittal operations.

    E. PRESENTING THE APPEARANCE THAT THE cOMPANY'S BUSINESS IS THAT OF A BANK

28. The Division's regulation 209 CMR 44.10 states, in part:

    Prohibited practices that are grounds for license revocation under M.G.L Chapter 169 Section 12 and the issuance of a cease and desist order under M.G.L. Chapter 169 Section 13 shall include the act of, "(2) implying that it is a bank or to act in any manner so as to lead the public to believe that its business is that of a bank or otherwise violate the unauthorized banking provisions of M.G.L. Chapter 167 Section 37.

29. The Division's examiners reviewed the Company's website, www.doublesbuildingsociety.com, and determined that the website presented the appearance that the Company engages in banking services. Specifically, the website advertises banking services including savings, lending, and mortgage services. In addition, the Division's examiners observed similar advertisements of such banking services at the (unlicensed) offices in Lowell and the main office in Worcester.

    F. FAILURE TO PROPERLY MAINTAIN AND PROVIDE FOR INSPECTION OF BOOKS AND RECORDS

30. Massachusetts General Laws, chapter 169, section 10 states, in part:

    A licensee shall, when directed by the commissioner, permit the commissioner or his duly authorized representative to inspect its records and evidence of compliance with this chapter or any rule or regulation issued thereunder and with any other law, rule and regulation applicable to the conduct of its business. For the purposes of such inspection, the commissioner or his representative shall have access to the offices and place of business, books, accounts, papers, records and files of licensee.

31. The Division's regulation 209 CMR 44.05(1) states:

    Each Licensee shall keep and use within the Commonwealth its books, records and accounts in a manner which will allow the Commissioner to determine whether the Licensee is complying with the provisions of M.G.L. c. 169 and applicable state and federal laws and regulations.

32. During the examination/inspection, the Company was unable to produce any 2008 financial statements. Therefore, the Division's examiners were unable to make a determination regarding the Company's financial responsibility.

    G. FAILURE TO DISCLOSE THE TYPE AND NUMBER OF ITS LICENSE TO CLIENTS

33. The Division's regulation 209 CMR 44.10 states, in part:

    Grounds for license revocation under M.G.L. c. 169, § 12 and the issuance of cease and desist orders under M.G.L. c. 169, § 13 shall include, but are not limited to, the following prohibited acts and practices by Licensees: . . .(3) failing to disclose the type and number of its license(s) to all clients in writing at the time deposits for transmittal abroad are accepted or to fail to disclose the type and number of its license(s) in all advertisements . .

34. Books and records reviewed during the examination/inspection revealed that the Company failed to disclose its license type and number on: its website, www.doublesbuildingsociety.com; remittal receipts provided to clients at the time of deposit for transmittal abroad; and advertisements located in the office locations.

    Conclusions of Law

35. Based on the information contained in Paragraphs 1 through 34, Doubles Building Society has failed to demonstrate the financial responsibility, character, reputation, integrity, and general fitness that would warrant the belief that the business will be operated honestly, fairly, and soundly in the public interest in violation of Massachusetts General Laws chapter 169, section 6 and the Division's regulation 209 CMR 44.03.
36. Based upon the information contained in Paragraphs 1 through 34. Doubles Building Society commingled money collected for transmission abroad from clients with its own funds, in violation of the Division's regulation 209 CMR 44.07.
37. Based upon the information contained in Paragraphs 1 through 34, Doubles Building Society conducted its foreign transmittal business in Massachusetts from an unlicensed location, in violation of Massachusetts General Laws chapter 169, section 6 and the Division's regulation 209 CMR 44.09(1).
38. Based upon the information contained in Paragraphs 1 through 34, Doubles Building Society failed to implement an effective anti-money laundering program commensurate with the risks posed by the location and size of, and nature and volume of the financial services provided by the Company, in violation of 31 C.F.R. 103.125.
39. Based upon the information contained in Paragraphs 1 through 34, Doubles Building Society failed to register with the Department of Treasury, in violation of 31 C.F.R. 103.41.
40. Based upon the information contained in Paragraphs 1 through 34, Doubles Building Society's advertisements presented the appearance that the Company's business is that of a bank, in violation of the Division's regulation 209 CMR 44.10.
41. Based upon the information contained in Paragraphs 1 through 34, Doubles Building Society failed to provide the Division with certain books and records, in violation of Massachusetts General Laws chapter 169, section 10 and the Division's regulations 209 CMR 44.05(1).
42. Based upon the information contained in Paragraphs 1 through 34, Doubles Building Society failed to disclose the type and number of its license to clients, in violation of the Division's regulation 209 CMR 44.10.
43. Based upon the information contained in Paragraphs 1 through 34, the Commissioner has determined that:
    1. Doubles Building Society has engaged, or is about to engage in, acts or practices which warrant the belief that the Company is not operating honestly, fairly, soundly and efficiently in the public interest in violation of standards governing the licensing and conduct of a foreign transmittal agency including, but not limited to, the provisions under General Laws chapter 169 and the Division's regulations at 209 CMR 44.00 et seq.
    2. The public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Doubles Building Society.
44. Based upon the information contained in Paragraphs 1 through 34, had the facts and conditions found therein existed at the time of Doubles Building Society's original foreign transmittal agency license application, the Commissioner would have been warranted in refusing to issue such license.

    ORDER TO CEASE AND DESIST

    After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:

45. ORDERED that Doubles Building Society, any and all officers, directors, employees, independent contractors, or agents operating on behalf of Doubles Building Society, and their successors or assigns, shall immediately cease engaging directly or indirectly in the business of a foreign transmittal agency in Massachusetts, as defined in M.G.L. chapter 169, section 1, except as otherwise expressly permitted by the terms of this Temporary Order.
46. IT IS FURTHER ORDERED that, within thirty (30) days from the effective date of this Temporary Order, Doubles Building Society shall submit to the Division updated audited or reviewed financial statements, including a balance sheet and interim income statement, prepared in accordance with generally accepted accounting principles ("GAAP").
47. IT IS FURTHER ORDERED that, within thirty (30) days from the effective date of this Temporary Order, Doubles Building Society shall submit to the Division a list of the total amount of transactions and amounts received per month for remittance to foreign countries for January 1, 2009 through the date of submission.
48. IT IS FURTHER ORDERED this Temporary Order shall become effective immediately and shall remain in effect unless set aside, limited or suspended by the Commissioner or upon court order after review pursuant to General Laws chapter 30A.
49. IT IS FURTHER ORDERED that a hearing will be scheduled on this matter to determine whether or not such Temporary Order shall become permanent and final only upon receipt of a written request for such a hearing from the Company within twenty (20) days of the effective date of this Temporary Order. If no hearing is requested within this twenty (20) day period, this Temporary Order shall become permanent and final until it is modified or vacated by the Commissioner.

 

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 2nd day of July, 2009

By: Steven L. Antonakes
Commissioner of Banks
Commonwealth of Massachusetts