Exhibit 80, Deposition of Charles H. Grice, Volume I, Blue Flame Medical LLC v. Chain Bridge Bank

Summary

Exhibit 80 (Document 132-80), filed May 7, 2021, in Blue Flame Medical LLC v. Chain Bridge Bank N.A., Civil Action No. 1:20-cv-00658, U.S. District Court for the Eastern District of Virginia. It reproduces pages of the videotape deposition via Zoom of Charles H. Grice, Volume I, taken Friday, April 9, 2021. In the testimony, the witness discusses the attention banking regulators give to Bank Secrecy Act and anti-money laundering enforcement compared with Regulation J, describing Regulation J as stable and technical. Mr. Madden objects to the form of questions about enforcement around Regulation J.

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EXHIBIT 80
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Page 1
CONFIDENTIAL - CHARLES H. GRICE VOL. I

US DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA

BLUE FLAME MEDICAL LLC,
Plaintiff, :
Vv. : Civil Action No.
CHAIN BRIDGE BANK N.A., : 1:20-cv-00658
JOHN J. BROUGH, and DAVID
M. EVINGER,
Defendants.

CHAIN BRIDGE BANK, N.A.,
Third-Party Plaintiff,
Vv.
JP MORGAN CHASE BANK,
N.A.,
Third-Party Defendant.

VIDEOTAPE DEPOSITION VIA ZOOM OF:
CHARLES H. GRICE VOLUME I

FRIDAY, APRIL 9, 2021

REPORTED BY:
SILVIA P. WAGE, CCR, CRR, RPR
JOB NO. 4528853

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CONFIDENTIAL - CHARLES H. GRICE VOL. I

attention of banking regulators and, frankly, I'd
say a large number of the alphabet regulations
such as Regulation J.

Q. Is it your view that banking system
soundness is more important than customer account
holder security in connection with banking?

A. I can't really rank them because I
don't -- you know, it's like which child do you
love the most.

I think the one way to think about is
the attention, the enforcement activity, the
guidance, the supervisory activity coming out of
Washington and then the regional offices of the
federal regulators and even the state regulators
is vastly disproportionate, right. It's so
heavily concentrated on the safety and soundness
provisions that are not technical, they are --
they're substantive but they are really
fundamental.

So Regulation J gets some attention
but, you know, we've had I'm going to estimate
250 enforcement actions against financial
institutions for Bank Secrecy Act violations and

collectively the penlites are far above a hundred

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CONFIDENTIAL - CHARLES H. GRICE VOL. I

billion dollars. So it's a -- it's a more -- I
just want to say it's a more fundamental kind of
preoccupation of the federal banking regulators.
The prudential supervisors are disproportionately
focused on BSA/AML fraud prevention as a way to
ensure the integrity of the financial system.

Q. Isn't part of the reason for that the
banks, typically, don't violate Regulation J?

MR. MADDEN: Objection to form.

A. Could you rephrase it or restate it
please? I'm sorry.

QO. Sure. You mentioned that there is
hundred billion enforcement fines regarding BSA,
if I take that to be accurate.

Isn't part of the reason you don't
see enforcement around Regulation J is because
banks don't often violate Regulation J; isn't
that true?

MR. MADDEN: Same objection.

A. I've never thought of it that way. I
think there's -- I think that's -- some of the
explanation is that -- I think another way of
Saying it is that these expectations of people

staying in their lanes or respecting the lines on

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CONFIDENTIAL - CHARLES H. GRICE VOL. I

the road are important, but I don't think -- I've
never seen a federal or state regulator punish a
financial institution for deviating from the
bright lines of Reg J in the pursuit of BSA/AML
or sanctions obligations.

So I just think they're different,
right. They're both important. One is enforced
much more aggressively.

I just haven't thought about this
issue of whether there are maybe just fewer
violations of Reg J. I think it's more having to
do with the nature of the violation of Reg J.

QO. Have you seen instances where
regulators have endorsed violations of Reg J in
order to comply with BSA rules?

A. Not put that way. The way I see it
is, you know, the financial institution does
whatever the financial institution does. It gets
evaluated, you know, promptly. I mean, at this
stage, we have about 8,000 banks. Most are
examined, at least, once a year. Some like J.P.
Morgan Chase my understanding is they have
perpetual teams of examiners living inside the

offices of the bank. So it's really a never

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CONFIDENTIAL - CHARLES H. GRICE VOL. I

ending securities of examinations.

I've never seen any banking
regulators say, we want you to violate Reg J.
But I guess, conversely, I've never seen anybody
say, I violated the Bank Secrecy Act or my AML
duties because I was trying to stay within the
lanes on Reg J and the regulators say, okay. I
-- I've never seen that. My experience is kind
of opposite, right.

Thank God you stopped the
transaction, returned the wire, whatever it is
that the bank did in the pursuit of bad guys, you
know, actual or suspected bad guy.

Q. Can you tell me of an instance --

A. Actual or suspected bad transaction.
I should speak more generally, I guess.

Q. Can you tell me of an instance where
Reg J was violated in connection with BSA/AML
functions and that was endorsed by regulators?

A. No, I've never -- I tried to say that
in my last answer. I've never seen an example
where a regulator endorsed a violation of Reg J.

Q. And the regulatory expectation is

that while you are -- "you" as a bank -- are

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CONFIDENTIAL - CHARLES H. GRICE VOL. I
complying with your BSA/AML obligations, you are
also supposed to act in accord with all other
banking regulations; isn't that the expectation?

A. That's the expectation, yes, sir.

Q. And there's no exception to Reg J
compliance in connection with the Bank Secrecy
Act; is there?

MR. MADDEN: Objection to form.

A. There is -- yeah, there's no express
carveout at all. So I -- you know, as if the two
obligations this perfectly in tandem with no
friction at all. But I -- I just want to -- asa
practitioner, when I look at these two
obligations, one is -- one is the, you know, kind
of metaphorical gorilla in the room or the
elephant in the room. One is a huge
preoccupation of really every banker. It's the
responsibility of every banker and every bank
regulator to get the BSA/AML fraud thing right.
And those standards are principle based, so
rather -- sometimes rather vague, but they come
with a powerful set of penalties. And the
expectations for conduct or my behavior within

those responsibilities has only increased.

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That is not true of Regulation J,
right. Regulation J earlier I described as
rather stable. It's rather technical. It's --
by "stable," I mean, not changing dramatically.
And you do not see headlines of banks that are
being accused of systemic Reg J failures.

Q. But if you see a headline of a bank
that's accused of a systemic BSA/AML failure,
that can be huge deal, that's the sort of thing
that's led to these -- over a billion dollars in
fines, I think, is your testimony; is that right?

A. Yeah. Just to be clear, it may have
come across badly in the audio. It was over a
hundred billion. So, you know, one bank paid
$10.5 billion fine --

Q. That's right.

A. -- if I'm getting it wrong.

Q. Right. And these huge potential
penalties are part of the reason -- from an
enforcement actions -- are part of the reason
that banks take this very seriously, BSA and AML,
correct?

A. Yeah, my -- I've got clients that run

the spectrum like, you know, people run the

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