8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):
October 12, 2004

AMSOUTH BANCORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction
of incorporation) 1-7476
(Commission
File Number) 63-0591257
(IRS Employer
Identification No.)

AMSOUTH CENTER
1900 FIFTH AVENUE NORTH
BIRMINGHAM, ALABAMA 35203
(Address, including zip code, of principal executive office)

Registrant’s telephone number, including area code: (205) 320-7151

Not applicable
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry Into Material Definitive Agreements

        AmSouth Bancorporation issued a press release today announcing that it and AmSouth Bank have entered into (i) a deferred prosecution agreement with the U.S. Attorney for the Southern District of Mississippi relating to deficiencies in the bank’s reporting of suspicious activities under the Bank Secrecy Act and (ii) a cease and desist order with the Federal Reserve and the Alabama Department of Banking and an assessment with FinCEN relating to deficiencies in AmSouth’s compliance with the Bank Secrecy Act.

        More information concerning the background of this matter and the terms and conditions of the agreement, the order and the assessment is contained in the press release that is Exhibit 99.1 hereto. The full text of the agreement, the order and the assessment are also attached as exhibits to this report.

Forward-Looking Statements. Statements in this report and the exhibits to the report that are not purely historical are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995), including any statements regarding descriptions of management’s plans, objectives or goals for future operations, products or services, and forecasts of its revenues, earnings or other measures of performance. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. A number of factors – many of which are beyond AmSouth’s control – could cause actual conditions, events or results to differ materially from those described in the forward-looking statements. Factors which could cause results to differ materially from current management expectations include, but are not limited to: customers’ and other third parties’ reactions to the matters described in this filing; the execution of AmSouth’s strategic initiatives; legislation and regulation; general economic conditions, especially in the Southeast; the performance of the stock and bond markets; changes in interest rates, yield curves and interest rate spread relationships; prepayment speeds within the loan and investment security portfolios; deposit flows; the cost of funds; cost of federal deposit insurance premiums; demand for loan products; demand for financial services; competition, including a continued consolidation in the financial services industry; changes in the quality or composition of AmSouth’s loan and investment portfolios including capital market inefficiencies that may affect the marketability and valuation of available-for-sale securities; changes in consumer spending and saving habits; technological changes; the growth and profitability of AmSouth’s mortgage banking business, including mortgage-related income and fees, being less than expected; adverse changes in the financial performance and/or condition of AmSouth’s borrowers which could impact the repayment of such borrowers’ loans; changes in accounting and tax principles, policies or guidelines and in tax laws; other economic, competitive, governmental and regulatory factors affecting AmSouth’s operations, products, services and prices; the effects of weather and natural disasters, such as hurricanes; unexpected judicial actions and developments; results of investigations, examinations, and reviews of regulatory and law enforcement authorities; the outcome of litigation, which is inherently uncertain and depends on the findings of judges and juries; the impact on AmSouth’s businesses, as well as on the risks set forth

above, of various domestic or international military or terrorist activities or conflicts; and AmSouth’s success at managing the risks involved in the foregoing. Forward-looking statements speak only as of the date they are made. AmSouth does not undertake a duty to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Item 9.01 Financial Statements and Exhibits

        (c)     Exhibits. The exhibits listed in the exhibit index are filed as part of this report on Form 8-K.

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AMSOUTH BANCORPORATION
By:	/s/ Carl L. Gorday
	Name: Title:	Carl L. Gorday Assistant Secretary

Date: October 12, 2004

Exhibit Index

Exhibit No.	Exhibit
99.1	Press Release of October 12, 2004
99.2	Deferred Prosecution Agreement
99.3	Cease and Desist Order
99.4	FinCEN Assessment

EX-99.1

News
Release AmSouth Bancorporation
Post Office Box 11007
Birmingham, Alabama 35288

FOR IMMEDIATE RELEASE

Contact:	Rick Swagler (News media)	(205) 801-0105
	List Underwood (Investment community)	(205) 801-0265

AmSouth Enters into Agreements with U.S. Attorney in Mississippi, Federal Reserve and FinCEN

BIRMINGHAM, Ala., Oct. 12, 2004 – AmSouth Bancorporation (NYSE: ASO) announced today that it and AmSouth Bank have entered into a deferred prosecution agreement with the U.S. Attorney for the Southern District of Mississippi relating to deficiencies in the bank’s reporting of suspicious activities under the Bank Secrecy Act. The matter initially arose out of a previously disclosed fraudulent note scheme committed by two bank customers, Louis Hamric and Victor Nance, beginning in 2000, but was subsequently expanded to include certain other specific matters, including AmSouth’s general policies and procedures for Bank Secrecy Act compliance. AmSouth has also entered into a cease and desist order with the Federal Reserve and the Alabama Department of Banking, and an order with FinCEN relating to deficiencies in AmSouth’s compliance with the Bank Secrecy Act.

        Under the agreement with the U.S. Attorney, acting on behalf of the Department of Justice, AmSouth has agreed to make a payment of $40 million to the United States. In connection with the Federal Reserve and FinCEN orders, AmSouth has been assessed a civil money penalty in the amount of $10 million. Additionally, as a result of these settlements, AmSouth will incur pretax costs of $4 million in professional and other related fees in the third quarter.

        AmSouth is committed to full compliance with the provisions of these agreements. Provided AmSouth complies with its obligations under the deferred prosecution agreement for a period of 12 months, the U.S. Attorney has agreed not to take further action against the company in connection with this matter. With respect to the cease and desist order, the Federal Reserve has indicated it will restrict the company’s expansion activities until such time as it believes the company is in substantial compliance with the requirements of the order.

        As part of the agreements, AmSouth has agreed to take additional actions to ensure compliance with the Bank Secrecy Act, including independent third-party reviews of its activities, enhanced training of personnel, submission of written plans, and adoption of approved policies and procedures.

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         C.  Dowd Ritter, AmSouth’s Chairman, President and Chief Executive Officer, said, “AmSouth is committed to meeting the highest standards in all aspects of its business. This is an obligation we take extremely seriously. We have already taken a number of remedial actions, and are committed to taking further actions, to ensure we are appropriately responding to the bank's obligations. AmSouth is a strong regional bank with a solid financial foundation, and we look forward to continuing to meet the needs of our customers and deliver value to our shareholders while meeting the highest standards of compliance.”

        At the time Hamric and Nance committed the fraud, Hamric was a practicing attorney and Nance was a registered representative for a broker-dealer affiliate of a national life insurance company. Beginning in 2000, Hamric and Nance opened custody accounts at AmSouth Bank to hold fraudulent notes issued by Hamric. In 2002 Hamric defaulted on promissory notes issued to over 40 of their clients, triggering a number of civil lawsuits against individuals and institutions, including Nance’s former employer and AmSouth. AmSouth, together with Nance’s former employer, has settled virtually all of these matters for amounts in excess of the principal investment. Hamric, Nance and other individuals connected with them pled guilty to criminal charges relating to the scheme in 2003.

        AmSouth has filed the deferred prosecution agreement and the orders on Form 8-K, which is available at the company’s Investor Relations Resource Center, www.amsouth.com/irrc and on the Securities and Exchange Commission’s website, www.sec.gov.

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Questions and Answers Regarding AmSouth’s Settlements

WHAT ARE BANKS’ OBLIGATIONS TO DETECT AND REPORT SUSPICIOUS
ACTIVITIES?
Under the Bank Secrecy Act, financial institutions are obligated to file Suspicious Activity Reports, or SARs, on suspicious activities involving the institution, including certain attempted or actual violations of law as well as certain transactions that do not appear to have a lawful business purpose or are not the sort of transaction in which the particular customer would normally be expected to engage.

WHAT IS A SUSPICIOUS ACTIVITY REPORT?
For information on Suspicious Activity Reports and the requirements for filing them, please refer to FinCEN’s website: www.fincen.gov.

WHAT IS FinCEN?
The Financial Crimes Enforcement Network is an agency of the U.S. Treasury Department whose mission is to support law enforcement investigative efforts and foster interagency and global cooperation against domestic and international financial crimes.

WHAT IS THE BANK SECRECY ACT?
The Bank Secrecy Act is the centerpiece of the federal government’s efforts to prevent banks and other financial institutions from being used to facilitate the transfer or deposit of money derived from criminal activity. The law was amended after 9/11 by the USA PATRIOT Act of 2001, expanding the important role the government expects banks to play in detecting and reporting suspicious activity.

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WHAT DOES THE DEFERRED PROSECUTION AGREEMENT REQUIRE?
Under the terms of the deferred prosecution agreement with AmSouth, the United States has filed a one count information in the United States District Court for the Southern District of Mississippi charging AmSouth with failing to file suspicious activity reports in a timely, complete and accurate manner, in violation of 31 U.S.C. §§ 5318(g)(1) and 5322(b) and 31 C.F.R. § 103.18. However, the Department of Justice will recommend to the Court that the prosecution of AmSouth be deferred for 12 months in light of AmSouth’s acknowledgment of responsibility, its continued cooperation, its willingness to comply fully with the Bank Secrecy Act, its willingness to comply fully with any subpoenas issued to it by any state or federal grand jury, and the assessment of a monetary penalty.

If AmSouth is in full compliance with all of its obligations under the agreement, the United States has agreed to seek dismissal of the information with prejudice within 30 days of the end of the 12-month period set forth in the agreement.

WHAT IS A “CEASE AND DESIST” ORDER FROM THE FEDERAL RESERVE?
HOW LONG DOES THE ORDER STAND?
The order is an enforcement action available to the Federal Reserve. The order in this case requires that the bank take specific actions, including steps to comply with the Bank Secrecy Act. The order is in force until the Federal Reserve determines that the bank is in substantial compliance with the requirements of the order. While an order such as this is to be taken very seriously, we believe AmSouth has a solid financial foundation on which to continue our business.

WHAT ACTIONS MUST AMSOUTH TAKE UNDER THE FEDERAL RESERVE’S
ORDER AND WHAT STEPS HAS THE COMPANY ALREADY TAKEN?
The order requires the bank to:

• Commission an independent review of the bank’s Bank Secrecy Act compliance program and submit a program to ensure compliance;
• Review and evaluate suspicious activity reporting, customer due diligence and fraud detection programs and staff;
• Conduct a review of account activity to determine whether suspicious activity was properly identified and reported;
• Strengthen the bank’s internal controls;
• Develop policies and procedures governing the conduct of the bank and its personnel in regulatory matters; and
• Submit monthly progress reports to the Federal Reserve.

The bank has already taken a number of actions, specifically:

• Engaged a nationally known consultant to provide a comprehensive review of our suspicious activity detection and reporting process;
• Reorganized the Bank Secrecy Act compliance area to have a separate unit devoted to the assessment and monitoring of high-risk customers;
• Strengthened its enterprise-wide risk management structure;
• Added additional staff for suspicious activity detection and reporting;
• Instituted training customized by line of business for detecting and reporting suspicious activities;
• Improved processes for detecting and reporting suspicious activities; and
• Committed to purchase and operate state of the art technology for detecting suspicious activities.

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HAVE THE VICTIMS OF THE FRAUD COMMITTED BY LOUIS HAMRIC AND
VICTOR NANCE BEEN COMPENSATED?
In 2002 Hamric defaulted on promissory notes he issued to over 40 clients, triggering a number of civil lawsuits against individuals (Hamric, Nance and others) and institutions, including Nance’s former employer and AmSouth. AmSouth, together with Nance’s former employer, has settled virtually all of these matters for amounts in excess of the principal investment.

WILL THE AGREEMENTS HAVE ANY EFFECT ON THE WAY AMSOUTH CONDUCTS BUSINESS?
The Federal Reserve has indicated that it will restrict AmSouth’s expansion activities until it believes the bank is in substantial compliance with the requirements of the order. These agreements are an important step in the process of putting this matter behind us. AmSouth is committed to full compliance with the provisions of the agreements and to continuing to strengthen its processes.

About AmSouth
AmSouth is a regional bank holding company with $48 billion in assets, more than 670 branch banking offices and over 1,200 ATMs. AmSouth operates in Florida, Tennessee, Alabama, Mississippi, Louisiana and Georgia. AmSouth is a leader among regional banks in the Southeast in several key business segments, including consumer and commercial banking, small business banking, mortgage lending, equipment leasing, mutual fund sales, and trust and investment management services. AmSouth also offers a complete line of banking products and services at its web site, www.amsouth.com.

Forward Looking Statements
Statements made in this document that are not purely historical are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995), including any statements regarding descriptions of management’s plans, objectives or goals for future operations, products or services, and forecasts of its revenues, earnings or other measures of performance. Forward-looking statements are based on current management expectations and, by their nature, are subject to risks and uncertainties. A number of factors – many of which are beyond AmSouth’s control – could cause actual conditions, events or results to differ materially from those described in the forward-looking statements. Factors which could cause results to differ materially from current management expectations include, but are not limited to: customers’ and other third parties’ reactions to the matters described in this filing; the execution of AmSouth’s strategic initiatives; legislation and regulation; general economic conditions, especially in the Southeast; the performance of the stock and bond markets; changes in interest rates, yield curves and interest rate spread relationships; prepayment speeds within the loan and investment security portfolios; deposit flows; the cost of funds; cost of federal deposit insurance premiums; demand for loan products; demand for financial services; competition, including a continued consolidation in the financial services industry; changes in the quality or composition of AmSouth’s loan and investment portfolios including capital market inefficiencies that may affect the marketability and valuation of available-for-sale securities; changes in consumer spending and saving habits; technological changes; the growth and profitability of AmSouth’s mortgage banking business, including mortgage-related income and fees, being less than expected; adverse changes in the financial performance and/or condition of AmSouth’s borrowers which could impact the repayment of such borrowers’ loans; changes in accounting

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and tax principles, policies or guidelines and in tax laws; other economic, competitive, governmental and regulatory factors affecting AmSouth’s operations, products, services and prices; the effects of weather and natural disasters, such as hurricanes; unexpected judicial actions and developments; results of investigations, examinations, and reviews of regulatory and law enforcement authorities; the outcome of litigation, which is inherently uncertain and depends on the findings of judges and juries; the impact on AmSouth’s businesses, as well as on the risks set forth above, of various domestic or international military or terrorist activities or conflicts; and AmSouth’s success at managing the risks involved in the foregoing. Forward-looking statements speak only as of the date they are made. AmSouth does not undertake a duty to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

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EX-99.2

IN THE UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION

UNITED STATES OF AMERICA

VS.

AMSOUTH BANCORPORATION and
AMSOUTH BANK

CRIMINAL NO

DEFERRED PROSECUTION AGREEMENT

        Defendants AMSOUTH BANCORPORATION and AMSOUTH BANK, a wholly-owned subsidiary of AMSOUTH BANCORPORATION (hereinafter collectively referred to as “AmSouth”), by their undersigned attorney, pursuant to authority granted by their Boards of Directors, and the United States enter into this Deferred Prosecution Agreement (hereinafter “the Agreement”).

        1. AmSouth shall waive indictment and agree to the filing of a one count Information (hereinafter “the Information”) in the United States District Court for the Southern District of Mississippi charging it with failing to file suspicious activity reports in a timely, complete and accurate manner, in violation of 31 U.S.C. §§ 5318(g)(1) and 5322(b) and 31 C.F.R. § 103.18.

        2. AmSouth accepts and acknowledges responsibility for its behavior as set forth in the Statement of Facts attached hereto and incorporated by reference herein as Appendix A (hereinafter “Statement of Facts”).

        3. AmSouth expressly agrees that it shall not, through its attorneys, board of directors, agents, officers, employees, or any other representative make or adopt any public statement contradicting any statement contained in this Agreement or the Statement of Facts, provided however, that AmSouth may avail itself of any legal or factual arguments available to it in defending litigation regarding any matter discussed therein. Any such contradictory statement by AmSouth, its attorneys, board of directors, agents, officers, employees, or any other representative shall constitute a breach pursuant to paragraph 11 of this Agreement, and AmSouth would thereafter be subject to prosecution pursuant to the terms of this Agreement. The decision whether AmSouth has breached this Agreement based upon any statement by any person described in this paragraph which contradicts any information contained in the Statement of Facts shall be in the sole discretion of the United States. If and when the United States notifies AmSouth of a public statement by any such person that in whole or in part contradicts any part of the Statement of Facts, AmSouth may avoid breach of this Agreement by publicly repudiating such statement within 48 hours after notification by the United States. Paragraph 11 sets forth the terms and conditions applicable to any breach of this Agreement by AmSouth.

        4. AmSouth agrees that it shall provide to the United States, on request, any relevant document, electronic data, or other object in AmSouth’s possession, custody and/or control concerning a Bank Secrecy Act matter and/or any matter charged in the Information subject to the Right to Financial Privacy Act and any other applicable laws and regulations. AmSouth further agrees that it will completely, fully and timely comply with all legal obligations, record keeping and reporting requirements imposed upon it by the Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq., and implementing regulations thereunder, 31 C.F.R. Part 103,

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and the Federal Reserve’s substantially similar regulations codified at 12 C.F.R. §§ 208.62 and 208.63.

        5. As a result of AmSouth’s conduct, as set forth in the Statement of Facts, pursuant to 18 U.S.C. § 981(a)(1)(A), AmSouth’s interests in certain forfeitable real and personal property could be subject to a civil forfeiture action. The United States agrees that any civil forfeiture claims it has against AmSouth or its property will be satisfied and compromised by AmSouth’s payment of the sum of $40 million pursuant to this paragraph and forfeiture of that amount to the United States. Accordingly, the United States and AmSouth hereby expressly agree to settle, and do settle, any and all claims that each could have made in any such civil forfeiture action.

        6. Because AmSouth agrees to

         (a) acknowledge responsibility for its actions as set forth in the Statement of Facts;

         (b) continue its cooperation with the United States;

         (c) demonstrate its future good conduct and full compliance with the Bank Secrecy Act and all of its implementing regulations;

         (d) demonstrate full compliance with any and all grand jury subpoenas issued to it by any state or federal grand jury; and

         (e) pay the sum of $40 million pursuant to paragraph 5 of this Agreement;

        the United States shall recommend to the Court, pursuant to 18 U.S.C. § 3161(h)(2), that prosecution of AmSouth on the Information filed pursuant to paragraph 1 of this Agreement be deferred for a period of twelve (12) months. AmSouth shall consent to a motion, the contents to be agreed by the parties, to be filed by the United States with the Court, promptly

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upon execution of this Agreement, pursuant to 18 U.S.C. § 3161(h)(2), in which the United States will present this Agreement to the Court and move for a continuance of all further criminal proceedings, including trial, for a period of twelve (12) months, for speedy trial exclusion of all time covered by such a continuance, and for approval by the Court of this deferred prosecution. AmSouth further agrees to waive and does hereby expressly waive any and all rights to a speedy trial pursuant to the Sixth Amendment of the United States Constitution, 18 U.S.C. § 3161, Federal Rule of Criminal Procedure 48(b), and any applicable Local Rules of the United States District Court for the Southern District of Mississippi for the time period that this Agreement is in effect.

        7. AmSouth hereby further expressly agrees that any violations of the Bank Secrecy Act pursuant to 31 U.S.C. §§ 5318, 5321 and 5322, and any violations of 18 U.S.C. §§ 1503, 1512 and 1517, that were not time-barred by the applicable statute of limitations on September 1, 2004, may, in the sole discretion of the United States, be charged against AmSouth, notwithstanding the expiration of any applicable statute of limitations, if the United States determines that AmSouth is in material breach of this Agreement subject to the cure provisions herein.

        8. The United States agrees that if AmSouth is in compliance with all of its obligations under this Agreement in all material respects, the United States, within thirty (30) days of the expiration of the time period set forth in paragraph 6 above, will seek dismissal with prejudice of the Information filed against AmSouth pursuant to paragraph 1 of this Agreement. Upon such dismissal of the Information, this Agreement shall expire. The expiration of this Agreement does not relieve AmSouth of the responsibility of complying with all applicable laws and regulations. The expiration of this Agreement does not alter or affect AmSouth’s

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responsibility to its banking regulators, including but not limited to the Federal Reserve, the Federal Reserve Bank of Atlanta, the Alabama State Banking Department, and FinCEN.

        9. AmSouth and the United States understand that the Agreement to defer prosecution of AmSouth must be approved by the Court, in accordance with 18 U.S.C. § 3161(h)(2). Should the Court decline to approve a deferred prosecution for any reason, both the United States and AmSouth are released from any obligation imposed upon them by this Agreement, and this Agreement shall be null and void.

        10. Should the United States, in its sole discretion, determine during the term of this Agreement that AmSouth has committed any federal crime commenced subsequent to the date of this Agreement, AmSouth shall thereafter be subject to prosecution for any federal crimes of which the United States has knowledge. Except in the event of a willful and material breach of this Agreement, it is the intention of the parties to this Agreement that all criminal, civil and regulatory investigations arising from AmSouth’s conduct or the facts contained in or involving the persons and/or accounts described in this Agreement and its exhibit, including the Statement of Facts, that have been or could have been conducted by the United States prior to the date of this Agreement shall not be pursued further against AmSouth.

        11. Should the United States, in its sole discretion, determine that AmSouth has committed a willful and material breach of any provision of this Agreement, the United States shall provide written notice to AmSouth of the alleged breach and provide AmSouth with a two-week period in which to make a presentation to the United States Attorney for the Southern District of Mississippi to demonstrate that no breach has occurred or, to the extent applicable, that the breach is not willful or material or has been cured. The parties hereto expressly understand and agree that should AmSouth fail to make a presentation to the United States

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Attorney for the Southern District of Mississippi within the said two-week period, it shall be conclusively presumed that AmSouth is in willful and material breach of this Agreement. The parties further understand and agree that the United States Attorney for the Southern District of Mississippi’s exercise of discretion under this paragraph is not subject to review in any court or tribunal. In the event of a breach of this Agreement that results in a prosecution, such prosecution may be premised upon any information provided by or on behalf of AmSouth to the United States at any time. Further, in the event of a breach, the $40 million payment by AmSouth pursuant to paragraph 5 will be returned to AmSouth.

        12. AmSouth agrees that if it sells or merges all or substantially all of its business operations as they exist as of the date of this Agreement, it shall include in any contract for sale or merger a provision binding the purchaser/successor to the obligations described in this Agreement.

        13. It is further understood that this Agreement is binding on AmSouth and the United States, but specifically does not bind any other federal agencies, or any state or local authorities, although the United States will bring the cooperation of AmSouth and its compliance with its other obligations under this Agreement to the attention of state or local prosecuting offices or any state or federal regulatory agencies, if requested by AmSouth or its attorneys.

        14. It is further understood that this Agreement does not relate to or cover any civil or criminal conduct by AmSouth other than the conduct described in, or arising from the facts contained in or involving the persons and/or accounts described in, the Agreement and its exhibit, including the Statement of Facts.

        15. AmSouth and the United States agree that, upon acceptance by the Court, this Agreement and a proposed Order deferring prosecution shall be filed in the United States District

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Court for the Southern District of Mississippi. AmSouth and the United States further agree that Exhibit 1 to Appendix A of this Agreement, which contains information concerning specific accounts and reporting of suspicious activity, will be filed under seal and shall remain under seal. AmSouth and the United States further agree that the information contained in Exhibit 1 may be revealed at some point in time when and if AmSouth is finally determined to be in material breach of this Agreement.

        16. AmSouth acknowledges that the unitary structure for its audit and compliance functions contributed to the absence of a system of independent checks and balances, and thereby contributed to the problems described in the Information, this Agreement, and the Statement of Facts.

        17. AmSouth has revised its policies, procedures and practices with respect to responding to grand jury subpoenas to ensure that all responses are complete and timely.

        18. The United States agrees that if AmSouth complies with all of the terms of this Agreement and agrees to accept responsibility for all of the conduct described in the Statement of Facts, then the United States will not prosecute any current or former AmSouth employee based upon any of the conduct described in this Agreement and its exhibit, including the Statement of Facts.

        19. This Agreement sets forth all the terms of the Deferred Prosecution Agreement between AmSouth and the United States. No promises, agreements or conditions have been entered into other than those expressly set forth in this Agreement, and none shall be entered into and/or be binding upon AmSouth or the United States unless expressly set forth in writing, signed by the United States, AmSouth’s attorneys, and a duly authorized representative of

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AmSouth and physically attached to this Agreement. This Agreement supersedes any prior promises, agreements or conditions between AmSouth and the United States.

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ACKNOWLEDGEMENTS

        I, T. Kurt Miller, the duly authorized representative of AmSouth Bank, hereby expressly acknowledge the following: (1) that I have read this entire Deferred Prosecution Agreement and all attachments hereto, and the other documents filed in the United States District Court for the Southern District of Mississippi in conjunction with this Agreement, including the Information; (2) that I have had an opportunity to discuss this Agreement fully and freely with AmSouth’s attorneys; (3) that AmSouth fully and completely understands each and every one of its terms; (4) that AmSouth is fully satisfied with the advice and representation provided to it by its attorneys; and (5) that AmSouth has signed this Agreement voluntarily.

/s/ T. Kurt Miller	October 12, 2004
T. KURT MILLER General Counsel	DATE

COUNSEL FOR AMSOUTH BANCORPORATION AND AMSOUTH BANK

        We, counsel for AmSouth Bancorporation and AmSouth Bank, hereby expressly acknowledge the following: (1) that we have discussed this Agreement with our clients; (2) that we have fully explained each one of its terms to our clients; (3) that we have fully answered each and every question put to us by our clients regarding the Agreement; and (4) we believe that our clients completely understand all of the Agreement’s terms.

/s/ Andrew L. Sandler	October 12, 2004
SKADDEN, ARPS, SLATE, MEAGHER     & FLOM LLP Robert S. Bennett, Esq. Andrew L. Sandler, Esq. Benjamin B. Klubes, Esq.	DATE

/s/ James B. Tucker	October 12, 2004
BUTLER, SNOW, O’MARA, STEVENS     & CANNADA, PLLC James B. Tucker, Esq.	DATE

Attorneys for AmSouth Bancorporation and AmSouth Bank

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ON BEHALF OF THE UNITED STATES

/s/ Dunn Lampton	October 12, 2004
DUNN LAMPTON United States Attorney Southern District of Mississippi	DATE

/s/ Cynthia L. Eldridge	October 12, 2004
CYNTHIA L. ELDRIDGE Assistant United States Attorney Criminal Division United States Attorney’s Office Southern District of Mississippi	DATE

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Appendix A

STATEMENT OF FACTS

Summary

        1. AmSouth Bancorporation and AmSouth Bank (hereinafter collectively referred to as “AmSouth” or “the Bank”) violated federal laws and regulations governing the filing of suspicious activity reports (“SARs”) by (1) failing to report suspicious transactions, and (2) failing to report suspicious transactions in a timely manner, and (3) failing to report suspicious transactions in an accurate manner, involving certain accounts at AmSouth Bank. One of these SAR violations involved a scheme by Louis D. Hamric and Victor G. Nance involving fraudulent promissory notes maintained at AmSouth’s Custody Services Department.

        2. AmSouth’s conduct which violated federal laws and regulations governing SAR filing includes, but is not limited to, the following: (a) Corporate Security employees did not file SARs in certain instances because AmSouth had not suffered a loss, even though they should have been aware that the suspicious conduct plainly warranted the filing of SARs; (b) AmSouth’s former in-house counsel assigned responsibility for pending or threatened civil litigation matters did not report certain transactions which he should have known were suspicious and required the filing of a SAR; and (c) AmSouth Corporate Security employees did not file SARs in certain instances where law enforcement was already aware of one or more of the suspects involved in the activity, even though they should have known that the suspicious conduct plainly warranted the filing of SARs.

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        3. By its conduct set forth in paragraph 2 and its conduct described in this Statement of Facts, AmSouth failed to prevent the use of its banking services by certain individuals engaged in unlawful conduct, including the fraudulent scheme by Hamric and Nance.

        4. In addition, AmSouth failed to produce timely certain documents as required by law in response to subpoenas issued between April 2002 and June 2003 by the federal grand jury in the Southern District of Mississippi investigating the Hamric and Nance scheme.

        5. AmSouth failed to provide sufficient information to the Federal Reserve Bank of Atlanta (“FRB Atlanta”) during its targeted reviews of AmSouth’s Wealth Management Business.

Legal Background

        6. AmSouth Bank is a financial institution organized, licensed and doing business under the laws of the United States and the State of Alabama.

        7. AmSouth is a “financial institution” as defined in 31 U.S.C. § 5312 and 31 C.F.R. § 103.11(n)(l); a “bank” as defined in 31 C.F.R. § 103.11(c); an “insured bank” as defined in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. § 1813(h)); and a “state member bank” of the Federal Reserve System (12 U.S.C. § 1813(d)).

        8. Three essential laws establish the basic anti-money laundering obligations of banking organizations in the United States: the Bank Secrecy Act (“BSA”), 31 U.S.C. § 5311 et seq.; the Money Laundering Control Act of 1986 (codified in relevant part at 18

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U.S.C. §§ 1956 and 1957); and the USA PATRIOT Act of 2001, which significantly amended both laws. As set forth in 31 U.S.C. §§ 5318(a)(2) and 5318(h) and 31 C.F.R. § 103.20, banking organizations are required to establish programs to guard against their use for money laundering which, at a minimum, include the following: (a) written, definite internal policies, procedures and controls; (b) the designation of a compliance officer; (c) an ongoing employee training program; and (d) an independent audit function to test programs. AmSouth also is required to report suspicious activity to law enforcement and regulators¹ as set forth in 31 U.S.C. § 5318(g) and 31 C.F.R. § 103.18 and the reporting rules of the Board of Governors of the Federal Reserve System (“the Federal Reserve Board”).² All SARs filed by banking organizations are required to be accurate and timely,³ and to provide a complete description of the suspicious activity involved. In order to resolve these allegations by the United States Attorney for the Southern District of Mississippi, AmSouth agrees to the filing of the Information charging AmSouth with a violation of these laws and regulations for failure in certain

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¹ The Financial Crimes Enforcement Network (“FinCEN”), a bureau of the Department of Treasury, administers the BSA on behalf of the Secretary of the Treasury and serves as the administrator of the database containing BSA reports filed by financial institutions. The BSA imposes a variety of record keeping and reporting requirements on certain financial institutions, including the duty to report suspicious activities.

² AmSouth Investment Services (“AIS”), a subsidiary of AmSouth Bancorporation, is an investment advisor regulated by the United States Securities and Exchange Commission (“SEC”). AmSouth Bancorporation reports suspicious activity on behalf of AIS.

³ FinCEN’s regulations governing SAR filings by banks require SARs to be filed “no later than 30 calendar days after the date of initial detection of facts that may constitute a basis for filing a SAR.” 31 C.F.R. § 103.18(b)(3).

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areas to file SARs, failure to file accurate SARs, and failure to file SARs in a timely manner.

The Hamric Matter

        9. In the spring of 2002, the United States Attorney’s Office for the Southern District of Mississippi, along with a number of federal and state agencies, began an investigation of a fraudulent promissory note scheme perpetrated by Louis D. Hamric, II, a licensed attorney, Victor G. Nance, a registered investment adviser employed by Mutual of New York (“MONY”), and various other individuals. In essence, Hamric would issue a Promissory Note to each investor promising to pay a very high interest rate for one year. Hamric had little, if any, contact with the actual investors. Various “promoters” of the scheme, including Nance, would bring investors to Hamric and receive a commission for their services. Hamric told Nance that he needed a “block” of $10 million to participate in a “trading program” that would provide returns through the promissory notes of up to 25% annually. Nance, a registered investment advisor representative, convinced over 40 of his clients to invest in Hamric’s program by making numerous misrepresentations to them about the nature and risk of the investment. Many of these investors were retired and had their life savings invested with Nance.⁴

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⁴ Victor Nance pled guilty to a money laundering charge, 18 U.S.C. § 1957, in connection with this scheme and is currently serving a 10-year sentence in the custody of the Federal Bureau of Prisons. Hamric paid Nance over $4 million in “commissions” for finding investors. Louis Hamric pled guilty to money laundering conspiracy, 18 U.S.C. § 1956(h), and is awaiting sentencing.

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        10. After Nance assured Hamric that he could provide the $10 million, both Hamric and Nance approached AmSouth⁵ to seek help in dealing with the large number of investors, many of whom had funds invested in individual retirement accounts (“IRAs”). Hamric and Nance misrepresented to AmSouth that the business venture involved construction of medical clinics overseas. In August 2000, after Hamric and Nance had spoken with several AmSouth officers, AmSouth agreed to perform, and performed, the following custodial services for Hamric and Nance, for a fee of $2,000 per year per account:⁶

(i) AmSouth established a custodial trust account, which could be designated as an IRA if requested, for each person for whom Hamric and Nance provided completed new account documents;⁷

(ii) Upon receipt of customer funds into each custodial trust account, AmSouth transferred all funds to an AmSouth money market account controlled by both Hamric and Nance, and accepted into each custodial trust account a Promissory Note, issued by Hamric;⁸

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⁵ AmSouth did not perform adequate due diligence with regard to Hamric or Nance, who had been prior customers of the Bank.

⁶ Hamric orally agreed to pay the fee for each custodial account established on behalf of Nance’s investors.

⁷ AmSouth provided blank account opening documents to Hamric and Nance and entrusted them to complete and return the documents to AmSouth for a custodial trust account to be opened. AmSouth did not question the existence or identity of any of the persons who were signing the forms.

⁸ Hamric and Nance prepared a “Direction of Investment” form, which each account holder was required to complete and sign. The purpose of the form was to instruct AmSouth how much each account holder wished to invest in a Hamric Promissory Note. AmSouth did not follow the instructions on the Direction of Investment forms for the overwhelming majority of Nance’s clients. Instead, AmSouth transferred all funds deposited into each custodial trust account to the

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(iii) AmSouth distributed interest payments, on a monthly basis, to each custodial trust account upon receipt of a check from Hamric and a spreadsheet from Nance directing how much money should be credited to each account; and

(iv) AmSouth provided a copy of each custodial account holder’s bank statement to both Hamric and Nance on a quarterly basis, without the knowledge or consent of custodial account holders.

        11. When the customer chose to reinvest, upon the maturity of the Promissory Notes, AmSouth agreed, without the knowledge of any of the account holders, to “net” the proceeds of the old note against the new one, and send Hamric the difference.

        12. Beginning in early 2001, several other “promoters” brought a second wave of investors into the Hamric scheme, and AmSouth held promissory notes promising to pay these new investors as much as 25% interest monthly. Although a note promising such interest is suspicious on its face, AmSouth did not question the terms or nature of any of these promissory notes.

        13. By early 2002, Hamric had stopped sending interest payment checks to AmSouth. On March 13, 2002, AmSouth sent a letter to each investor informing them that six (6) checks sent by Hamric in January had been returned unpaid, that AmSouth had mistakenly sent interest payments to certain custodial account holders, and that AmSouth had demanded reimbursement from Hamric in the amount of $119,013.50. AmSouth stated that “it may be necessary for those account holders that received direct

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money market account controlled by both Hamric and Nance. No AmSouth employee could explain why AmSouth disregarded the instructions on the Direction of Investment forms and instead transferred all of the funds out of each custodial trust account and into the Hamric/Nance money market account.

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distributions in 2002 to refund such distributions,” in the event that the money could not be recovered from Hamric. AmSouth then advised its account holders that the reason for the letter was to inform them of Hamric’s delinquencies so that the account holders could take any action they deemed necessary.

        14. Without AmSouth’s participation through, among other things, the failure of one, or more, AmSouth managers to properly question whether the Hamric and Nance schemes were fraudulent, Hamric and Nance would not have succeeded in their schemes pursuant to which they attracted a total of approximately $20 million in fraud proceeds, caused those proceeds to be deposited into AmSouth accounts, and transferred those proceeds, in violation of 18 U.S.C. §§ 1956 and 1957, among and out of those accounts.

The Hamric Grand Jury Investigation

        15. When Hamric failed to pay interest owed to the investors, the fraudulent promissory note scheme fell apart, triggering a number of civil lawsuits against individuals (Hamric, Nance and others) and institutions, including MONY⁹ and AmSouth. All or almost all of these suits have been settled. The scheme also became the subject of several investigations by state and federal authorities, including a federal grand jury investigation in the Southern District of Mississippi.

        16. Beginning on April 29, 2002, and concluding just prior to June 4, 2003,¹⁰ eight federal grand jury subpoenas were issued to AmSouth. These subpoenas requested

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⁹ MONY terminated Nance in June of 2001.

¹⁰ Hamric and Nance were indicted on June 4, 2003.

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all documents relating to the Hamric and Nance promissory note scheme, including all documents for any custodial trust accounts opened by either Hamric or Nance on behalf of an account holder; all documents for any bank accounts held by Hamric or Nance and various others associated with the scheme; and all internal and external communications between any AmSouth employee and Hamric, Nance or any custodial trust account holder.

        17. In responding to these grand jury subpoenas, AmSouth (i) failed to timely produce certain documents called for by these subpoenas; (ii) failed to produce certain documents in the manner they were kept in the regular course of business as required by the subpoenas; and (iii) failed to locate and produce certain documents called for by the subpoenas until AmSouth was targeted in this criminal investigation.

        18. AmSouth’s outside counsel¹¹ assumed certain responsive documents had been produced even though they had not been produced. Inside counsel overseeing the production failed to search his own files even though they contained documents responsive to the subpoenas. AmSouth’s inside counsel was aware, or should have been aware, of other AmSouth employees who had documents directly responsive to one or more of the federal grand jury subpoenas, but he did not request any documents from these employees.

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¹¹ All references to AmSouth’s outside counsel in this document refer to counsel it employed prior to September 24, 2003 at which time AmSouth replaced this counsel with new Mississippi counsel, and later retained Washington, DC based counsel, in connection with the criminal investigation that is the subject of the Information and Deferred Prosecution Agreement filed in conjunction with this Statement of Facts.

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        19. AmSouth Custody Services Department employees, who were made aware of the federal grand jury subpoenas, failed to provide all documents in their possession which were responsive to one or more federal grand jury subpoenas.

        20. Through the course of the investigation and through grand jury subpoenas to other sources, certain AmSouth documents became available to federal investigators, including, but not limited to, the AmSouth account holders’ bank statements, which were discovered in Hamric’s office. Attorneys for the government had discussions with AmSouth’s outside counsel concerning the discovery of Bank documents from other sources that had not been produced by AmSouth. AmSouth’s outside counsel’s responses to these concerns were misleading and inadequate given AmSouth’s legal obligations with respect to the grand jury subpoenas. Even after many discussions and other communications between AmSouth’s outside counsel and attorneys for the government, AmSouth still failed to produce all responsive documents in a timely manner.

        21. Although AmSouth ultimately produced all of these documents after it became the subject of a criminal investigation,¹² the delays in production are legally inexcusable. Given its failures in responding to these numerous grand jury subpoenas, AmSouth has revised its policies and procedures for responding to such subpoenas and

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¹² On September 24, 2003, AmSouth employed new outside counsel who began discussions with the United States Attorney’s Office for the Southern District of Mississippi concerning AmSouth’s criminal exposure. AmSouth was formally advised that it was a target of a criminal investigation on November 17, 2003.

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will devote additional resources to ensure full and timely responses to all grand jury subpoenas.

Suspicious Activity Reports

        22. All financial institutions are required by federal statutes and regulations to report suspicious activity to law enforcement, banking regulators, and FinCEN. The SAR filing form contains instructions that detail the legal and regulatory requirements for reporting suspicious activity. Suspicious activity must be reported in a timely manner in order for the reporting to be both helpful and useful to law enforcement authorities and regulatory agencies. The FinCEN regulations governing SAR filings contain a time requirement:

A bank is required to file a SAR no later than 30 calendar days after the date of initial detection of facts that may constitute a basis for filing a SAR. If no suspect was identified on the date of detection of the incident requiring the filing, a bank may delay filing a SAR for an additional 30 calendar days to identify a suspect. In no case shall reporting be delayed more than 60 calendar days after the date of initial detection of a reportable transaction. In situations involving violations requiring immediate attention, such as, for example, ongoing money laundering schemes, the bank shall immediately notify, by telephone, an appropriate law enforcement authority in addition to filing timely a SAR.

31 C.F.R. § 103.18(b)(3) (emphasis added). The Federal Reserve Board has issued SAR regulations containing a substantially similar provision. See 12 C.F.R. § 208.62(d).

        23. All SARs are stored in a database administered by FinCEN which may be accessed by law enforcement and certain regulators. This comprehensive database is invaluable to law enforcement in the investigative process, in part for determining whether criminal suspects might be engaging in criminal activity in more than one financial institution and/or more than one jurisdiction.

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Hamric SAR

        24. AmSouth officers and employees at seven different branches in four separate states, including its main office in Birmingham, Alabama, had contacts with Hamric and/or Nance or their customers in connection with their “Ponzi” scheme. These contacts occurred over a time period spanning nearly two years. At least one¹³ of these AmSouth employees suspected that Hamric was involved in a possibly illegal scheme and reported these concerns to AmSouth’s legal department and to AmSouth Corporate Security. These departments, in conjunction with AmSouth’s management, had a legal obligation to report that Hamric might be operating a “Ponzi” scheme, and AmSouth failed to timely file a SAR.

        25. The SAR that was ultimately filed reporting the Hamric scheme was filed nearly two years after the date that an AmSouth employee initially detected or should have detected the suspicious activity, and several months after AmSouth learned that law enforcement was investigating Hamric. The Hamric SAR, by characterizing the suspicious activity as check fraud and by understating the amount involved, failed to fully and accurately describe the criminal activities of Hamric.¹⁴

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¹³ Many of those employees did not recognize any reportable suspicious activity because they did not receive the necessary training from AmSouth to recognize such activity as suspicious.

¹⁴ AmSouth’s legal department, including its then-General Counsel reviewed the Hamric SAR after it was filed and found it sufficient.

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Other Suspicious Activity Reports

        26. AmSouth unlawfully failed to file SARs in a timely fashion, or at all, in the instances identified in Exhibit 1.¹⁵ AmSouth has now filed SARs with respect to each of these matters. The following are some examples of matters in which suspicious activity occurred in various AmSouth bank accounts, and SARs should have been filed:

• Terry Dowdell, from Charlottesville, Virginia, was indicted for running a global “Ponzi” scheme involving over $120 million. The SEC began investigating Dowdell at least by December of 2000, when it sent several subpoenas to AmSouth Bank requesting information on Dowdell’s bank accounts. By March of 2001, Dowdell had raised at least $29 million, most or all of which was deposited into his AmSouth bank account in Florida. The SEC filed a complaint against Dowdell in November, 2001, and publicized this suit on its website. Dowdell was also being investigated by criminal authorities, and was indicted and arrested in June, 2002, for his prime bank fraud scheme. AmSouth had a duty to ask Dowdell about the suspicious origin of the millions of dollars he was putting into his AmSouth accounts, and it failed to do so, even after AmSouth received numerous regulatory and law enforcement subpoenas on those accounts. AmSouth did not learn of Dowdell’s arrest until January, 2003, through the World Check service. Even after articles began appearing in newspapers and magazines concerning Dowdell’s illegal activities, for which he had been indicted, AmSouth did not file a SAR detailing the suspicious activity occurring in Dowdell’s AmSouth accounts. Contrary to federal law and regulations, AmSouth determined that public disclosure in the media that law enforcement was investigating Dowdell relieved it of an obligation to file a SAR. AmSouth now acknowledges that a SAR should have been filed, and recently has filed a SAR.
  
  
• Judge Howard Butler, of Rockwood, Tennessee, committed suicide after allegations that he embezzled over $450,000 from the City of Rockwood’s AmSouth account. That account required two signatures in order for checks to be valid. After the city announced an investigation into whether Judge Butler had misappropriated funds, it made a demand on AmSouth for at least a portion of these funds because many of the checks cashed by Judge Butler had plainly insufficient endorsements. Even after confirming the improper endorsements, AmSouth did not file a SAR in this matter

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¹⁵ This exhibit shall be filed under seal with the Court due to the customer information it contains.

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because it concluded that no Bank employee had engaged in any misconduct and because, according to AmSouth’s Chief of Security, “Judge Butler is dead.” Other participants in the scheme were identified by law enforcement and charged in the scheme. AmSouth had a duty to report the suspicious (and confirmed) illegal activity of Judge Butler and others involved in the scheme, and it failed to do so. AmSouth now acknowledges that a SAR should have been filed in this matter, and recently has filed a SAR.

• For a seven year period beginning in 1992, Robert Humber, vice president of the Citizens Bank of Fayette, Alabama, used wire transfers from the Citizens Bank account at the Federal Reserve Bank of Atlanta to put over $18 million into his personal account at AmSouth Bank. Humber then invested many of these funds with AmSouth’s broker-dealer subsidiary, AIS. AmSouth did not question the suspicious amounts of money coming into Humber’s bank account directly from another bank’s Federal Reserve account. When Citizens Bank and law enforcement notified AmSouth about the fraud, AmSouth agreed to freeze all of Humber’s accounts. AmSouth failed to recognize and report the activity in Humber’s accounts as suspicious, at least by the time it was notified by law enforcement and agreed to freeze those accounts. AmSouth now acknowledges that a SAR should have been filed in this matter, and recently has filed a SAR.
  
  
• Another matter involved an AmSouth Investment Services (“AIS”) employee who allegedly committed fraud in AIS clients’ accounts by, among other things, forging customer signatures on numerous documents. AmSouth reported this employee’s misconduct to the National Association of Securities Dealers (“NASD”). AmSouth also had a duty to report what it knew to be suspicious activity by its own employee to FinCEN, and it failed to do so. AmSouth now acknowledges that a SAR should have been filed in this matter, and recently has filed a SAR.

        27. AmSouth management had a duty to recognize suspicious activity and, once recognized, to file SARs in a timely manner and accurately report the suspicious activity. AmSouth failed in this duty, as set forth in Exhibit 1. AmSouth’s failure is due, at least in part, to the following practices which violated the applicable statutes:

• When law enforcement already was aware of one or more potential defendants, AmSouth Corporate Security, in many instances, did not file a SAR.
  
  
• When AmSouth had been sued or anticipated civil litigation, the responsible AmSouth in-house counsel, often did not evaluate the necessity for filing a SAR.

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• When AmSouth did not suffer a loss, AmSouth Corporate Security, in many circumstances, did not file a SAR.

        28. AmSouth management failed (a) to sufficiently learn and abide by federal rules and regulations governing SAR filing; and (b) to properly train AmSouth employees with respect to the Bank’s legal obligations to recognize and report suspicious activity.

END OF THE STATEMENT OF FACTS

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EX-99.3

UNITED STATES OF AMERICA
BEFORE
THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.

STATE OF ALABAMA
ALABAMA DEPARTMENT OF BANKING
MONTGOMERY, ALABAMA

In the Matter of	) )
	)	Docket Nos.	04-021-B-HC
AMSOUTH BANCORPORATION	)		04-021-B-SM
Birmingham, Alabama	)		04-021-CMP-HC
	)		04-021-CMP-SM
and	)
AMSOUTH BANK Birmingham, Alabama	) ) ) )	Cease and Desist Order and Order of Assessment of a Civil Money Penalty Issued Upon Consent Pursuant to the Federal Deposit Insurance Act, as Amended

        WHEREAS, AmSouth Bancorporation, Birmingham, Alabama (“AmSouth”), a registered bank holding company, and its subsidiary bank, AmSouth Bank, Birmingham, Alabama (the “Bank”), an Alabama state-chartered bank that is a member of the Federal Reserve System, are taking steps to address deficiencies identified by the Federal Reserve Bank of Atlanta (the “Reserve Bank”) in several areas, including the Bank’s compliance with all applicable federal laws, rules, and regulations relating to anti-money laundering (“AML”), including the Currency and Foreign Transactions Reporting Act (31 U.S.C. 5311 et seq.) (the Bank Secrecy Act or “BSA”), the rules and regulations issued thereunder by the U.S. Department of the Treasury (31 C.F.R. Part 103), and the AML provisions of Regulation H of the Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. 208.62 and 208.63);

        WHEREAS, in order to ensure that AmSouth and the Bank fully address all deficiencies in the Bank’s AML policies and procedures, customer due diligence practices, fraud detection program, internal control environment, management oversight, and responses to law enforcement and regulatory requests, the Board of Governors, AmSouth, and the Bank have mutually agreed to enter into this combined consent Cease and Desist Order and Order of Assessment of a Civil Money Penalty (the “Order”);

        WHEREAS, the Bank engaged in (a) violations of section 208.63 of Regulation H of the Board of Governors by failing to establish and maintain procedures reasonably designed to assure and monitor compliance with the BSA; (b) violations of section 208.62 of Regulation H of the Board of Governors by failing to file accurate, complete, or timely Suspicious Activity Reports (“SARs”); and (c) unsafe and unsound practices by failing to have adequate systems in place to prevent, identify, and report criminal activity conducted through the Bank, and failing to promptly and fully cooperate with law enforcement authorities in the review and investigation of such activity;

        WHEREAS, AmSouth and the Bank have consented to the assessment of a civil money penalty by the Board of Governors in the amount of ten million dollars ($10,000,000) for the Bank’s aforementioned violations of law and regulation and unsafe and unsound practices, and by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) for violations of the anti-money laundering program and suspicious activity reporting requirements of the BSA;

        WHEREAS, AmSouth and the Bank have entered into a Deferred Prosecution Agreement with the U.S. Attorney’s Office for the Southern District of Mississippi on October 12, 2004 in

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connection with an Information charging violations of the BSA relating to the filing of inaccurate, incomplete, or late SARs;

        WHEREAS, the State of Alabama Department of Banking (the “Superintendent”) joins in all provisions of this Order except the civil money penalty assessment set forth in paragraphs 8 and 9 of this Order; and

        WHEREAS, on October 12, 2004, the boards of directors of AmSouth and the Bank, at duly constituted meetings, adopted resolutions authorizing and directing T. Kurt Miller, General Counsel, to enter into this Order on behalf of AmSouth and the Bank, and consenting to compliance with each and every applicable provision of this Order by AmSouth, the Bank, and their institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”) (12 U.S.C. 1813(u) and 8(b)(3)), and waiving any and all rights that AmSouth and the Bank may have pursuant to section 8 of the FDI Act (12 U.S.C. 1818) to: (i) a hearing for the purpose of taking evidence on any matters set forth in this Order; (ii) judicial review of this Order; and (iii) challenge or contest, in any manner, the basis, issuance, validity, terms, effectiveness or enforceability of this Order or any provisions hereof.

        NOW, THEREFORE, before the taking of any testimony or adjudication of, or finding on any issue of fact or law herein, and without this Order constituting an admission of any allegation made or implied by the Board of Governors or the Superintendent in connection with this proceeding;

        IT IS HEREBY ORDERED that, pursuant to sections 8(b)and 8(i) of the FDI Act (12 U.S.C. 1818(b) and (1818(i)), AmSouth, the Bank, and their institution-affiliated parties cease and desist and take the following affirmative action:

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Anti-Money Laundering Compliance

        1.     (a) AmSouth and the Bank shall engage a qualified independent consultant (the “Consultant”) acceptable to the Reserve Bank and the Superintendent to conduct a comprehensive review of the Bank’s AML compliance program and make recommendations, as appropriate, for new policies and procedures to be implemented by the Bank. AmSouth and the Bank may continue to retain the independent consultant hired prior to the date of this Order and make enhancements to the terms of the engagement as necessary to comply with the terms of this Order. Under the terms of the engagement, the Consultant shall:

(i) Conduct a comprehensive review of the Bank’s policies and procedures for compliance with: the BSA and the rules and regulations thereunder; the AML provisions of Regulation H of the Board of Governors; customer due diligence policies and procedures; administrative summonses, subpoenas, and other law enforcement requests; and the regulations of the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) (31 C.F.R. 500 et seq.), as well as any guidelines issued or administered by OFAC;

(ii) assist the Bank in establishing the programs described in paragraphs 2 and 3 of this Order; and

(iii) assist the boards of directors of AmSouth and the Bank in their review of the Bank’s governance, management, and reporting structure for the Bank’s AML, customer due diligence, and fraud detection programs.

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           (b) The review described in paragraph 1(a)(i) of this Order shall be completed within 60 days of this Order.

           (c) Upon completion of the review described in paragraph 1(a)(i) of this Order, the Consultant shall provide to the Reserve Bank and the Superintendent a report (the “Consultant’s Report”) detailing the findings, conclusions, and recommendations of the review.

       2. Within 30 days of the completion of the Consultant’s Report, AmSouth and the Bank shall submit to the Reserve Bank and the Superintendent an acceptable written program designed to ensure compliance with all applicable provisions of the BSA and the rules and regulations issued thereunder, as required by section 208.63 of Regulation H of the Board of Governors. The program shall provide for updates, on an ongoing basis, as necessary to incorporate amendments to the BSA and the rules and regulations issued thereunder. The program, at a minimum, shall provide for:

           (a) Adequate internal controls to ensure compliance with the BSA and the rules and regulations issued thereunder;

           (b) independent testing of compliance with the BSA and the rules and regulations issued thereunder that provides for and includes:

(i) compliance testing for all appropriate business lines conducted by qualified staff who are independent of the Bank’s compliance function;

(ii) formal, documented work programs, including adequately detailed reports and workpapers;

(iii) the review of independent testing results by senior management;

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(iv) procedures to ensure that senior management institutes appropriate actions in response to independent testing results; and

(v) direct lines of reporting between the independent testing function and the Bank’s board of directors or its designee;

           (c) management of the Bank’s BSA compliance program and AML controls by a qualified officer who has responsibility for all BSA compliance and related matters, including, without limitation, (i) the identification and timely, accurate, and complete reporting to law enforcement and supervisory authorities of unusual or suspicious activity or known or suspected criminal activity committed against or involving the Bank, and (ii) monitoring the Bank’s compliance and ensuring that full and complete corrective action is taken with respect to all previously identified violations and deficiencies; and

           (d) effective training for all appropriate personnel (including, but not limited to, customer contact personnel across all business lines) in all areas related to BSA and AML requirements, with an emphasis on accurate form completion and the identification and reporting of known or suspected criminal activity, and the updating of training on a regular basis.

Suspicious Activity Reporting and Customer Due Diligence

        3. Within 30 days of the completion of the Consultant’s Report, AmSouth and the Bank shall submit to the Reserve Bank and the Superintendent an acceptable written customer due diligence program designed to reasonably ensure the identification and timely, accurate, and complete reporting of all known or suspected violations of law and suspicious activities against or involving the Bank to law enforcement and supervisory authorities, as required by the suspicious activity reporting provisions of Regulation H of the Board of Governors (12 C.F.R. 208.62). At a minimum, the program shall include:

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           (a) A risk-focused assessment of the Bank’s customer base to:

(i) identify the categories of customers whose transactions and banking activities are routine and usual; and

(ii) determine the appropriate level of enhanced due diligence necessary for those categories of customers that the Bank has reason to believe pose a heightened risk of illicit activities at or through the Bank;

           (b) for those customers whose transactions require enhanced due diligence, additional procedures to:

(i) determine the appropriate documentation necessary to confirm the business activities of the customer; and

(ii) understand the normal and expected transactions of the customer; and

            (c) procedures designed to ensure proper identification and reporting of all known or suspected violations of law and suspicious transactions, including but not limited to:

(i) effective monitoring of customer accounts and transactions;

(ii) detailed, comprehensive procedures designed to ensure that suspicious activity is consistently identified and reported across business lines;

(iii) procedures to ensure that matters evaluated for risk of loss or litigation are also reviewed for potential suspicious activity;

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(iv) appropriate participation by senior management in the process of identifying, reviewing, and reporting potentially suspicious activity; and

(v) adequate referral of information about potentially suspicious activity through appropriate reporting lines and levels of management.

Transaction Review

        4.     (a) Within 20 days of this Order, AmSouth and the Bank shall engage the Consultant or another qualified independent firm acceptable to the Reserve Bank and the Superintendent to conduct a review of account and transaction activity for the time period from September 1, 2001 through the present to determine whether suspicious activity involving accounts or transactions at, by, or through the Bank was properly identified and reported in accordance with the applicable suspicious activity reporting regulations (the “Transaction Review”).

           (b) Prior to the commencement of the Transaction Review, AmSouth and the Bank shall submit to the Reserve Bank and the Superintendent for approval an engagement letter that sets forth:

(i) The scope of the Transaction Review, including the types of accounts and transactions to be reviewed;

(ii) the methodology for conducting the Transaction Review, including any sampling procedures to be followed; and

(iii) the expertise and resources to be dedicated to the Transaction Review.

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            (c) Upon completion of the Transaction Review, AmSouth and the Bank shall provide to the Reserve Bank and the Superintendent a copy of the consultant’s report detailing the findings of the Transaction Review at the same time the report is provided to the Bank.

           (d) Upon completion of the Transaction Review, AmSouth and the Bank shall ensure that all transactions required to be reported that have not previously been reported are reported in accordance with applicable rules and regulations.

Internal Controls

        5. Within 30 days of the completion of the Consultant’s Report, AmSouth and the Bank shall submit to the Reserve Bank and the Superintendent acceptable written procedures designed to strengthen the Bank’s internal controls. The procedures shall, at a minimum, address, consider, and include:

           (a) Establishment of effective management information systems (“MIS”) in all business lines to support suspicious activity reporting and the integration of such MIS across business lines to ensure that all necessary information is readily available, reliable, identifiable, and accessible by staff of the Bank’s various compliance functions, including, audit, compliance, legal, and fraud detection;

           (b) appropriate segregation of duties; and

           (c) guidelines designed to ensure prompt and complete responses to administrative summonses, subpoenas, and other law enforcement requests.

Management Review

        6. Within 90 days of this Order, the boards of directors of AmSouth and the Bank shall conduct a review of the governance and organization of the Bank’s AML compliance, customer due diligence, and fraud detection programs and the performance of the Bank’s staff

9

responsible for such programs (collectively, the “Management Review”). At the conclusion of the Management Review, the boards of directors of AmSouth and the Bank shall forward to the Reserve Bank and the Superintendent a written report that includes findings, conclusions, and a description of specific actions that the boards of directors propose to take to strengthen the Bank’s AML compliance, customer due diligence, and fraud detection programs. The primary purpose of the Management Review shall be to aid in the development of a management and reporting structure for the Bank’s AML compliance, customer due diligence, and fraud detection programs that is appropriate for the Bank’s size and complexity and is adequately staffed by qualified and trained personnel. The Management Review shall, at a minimum, address, consider, and include:

           (a) An evaluation of each current senior officer with responsibilities related to the Bank’s AML compliance, customer due diligence, and fraud detection programs to determine whether the individual possesses the ability, experience, and other qualifications required to competently perform present and anticipated duties, including the ability to provide appropriate oversight, to ensure compliance with all applicable laws, rules, and regulations, to adhere to established policies and procedures, and to comply with the requirements of this Order;

           (b) a plan to recruit, hire, or appoint additional or replacement personnel with the requisite ability, experience, and other qualifications required to competently perform their assigned duties;

           (c) adequate resources and staffing necessary to implement and maintain effective AML compliance, customer due diligence, and fraud detection programs;

           (d) MIS adequate to ensure that appropriate management personnel receive timely and accurate reports;

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           (e) reporting lines and escalation procedures; and

           (f) the deficiencies related to management, operations, and staffing of the AML compliance, due diligence, and fraud prevention programs noted in the report of the examination conducted by the Reserve Bank in June 2004.

Interaction with Regulatory Authorities

        7. Within 30 days of this Order, AmSouth and the Bank shall submit to the Reserve Bank and the Superintendent acceptable revised written policies and procedures that govern the conduct of AmSouth and Bank personnel in all regulatory matters, including, but not limited to interaction with and information requests by Reserve Bank and Department examiners. The policies and procedures shall, at a minimum, ensure that all AmSouth and Bank personnel provide prompt, complete, and accurate information to banking regulators, and provide for employee training that emphasizes the importance of full cooperation with banking regulators by all employees.

Civil Money Penalty Assessment

        8.    The Board of Governors hereby assesses AmSouth and the Bank a joint civil money penalty in the amount of ten million dollars ($10,000,000).

        9.    (a) The civil money penalty assessed pursuant to paragraph 8 of this Order shall be concurrent with the penalty of ten million dollars ($10,000,000) assessed against the Bank by FinCEN.

               (b)   The penalty payments to the Board of Governors and FinCEN described in paragraphs 8 and 9(a) of this Order shall be satisfied by one payment of ten million dollars ($10,000,000) to the U.S. Department of the Treasury.

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Compliance with Order

        10. Within 10 days after the end of each month following the date of this Order, the boards of directors of AmSouth and the Bank shall submit to the Reserve Bank and the Superintendent written progress reports detailing the form and manner of all actions taken to secure compliance with the provisions of this Order, and the results thereof. Management’s responses to any independent testing or audit reports on AML compliance, customer due diligence, and fraud detection programs prepared by internal and external auditors shall be included with the progress report. The Reserve Bank and the Superintendent may, in writing, discontinue the requirement for progress reports or modify the reporting schedule.

Approval of Programs and Procedures

        11. The written programs, policies, procedures, and engagement letter required by paragraphs 2, 3, 4(b), 5, and 7 of this Order shall be submitted to the Reserve Bank and the Superintendent for review and approval. Acceptable programs, policies, procedures, and an acceptable engagement letter shall be submitted within the time periods set forth in this Order. The Bank and AmSouth, where applicable, shall adopt the approved programs, policies, procedures, and engagement letter within 10 days of approval by the Reserve Bank and the Superintendent and then shall fully comply with them. During the term of this Order, the Bank and AmSouth, where applicable, shall not amend or rescind the approved programs, policies, procedures, and engagement letter without the prior written approval of the Reserve Bank and the Superintendent.

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Communications

        12. All communications regarding this Order shall be sent to:

(a) Mr. William B. Estes III
Senior Vice President
Federal Reserve Bank of Atlanta
1000 Peachtree Street, N.E.
Atlanta, Georgia 30309-4470

(b) Mr. Anthony Humphries
Superintendent of Banks
401 Adams Avenue, Ste. 680
Montgomery, Alabama 36130-1201

(c) Mr. C. Dowd Ritter
Chairman of the Boards of Directors
and Chief Executive Officer
AmSouth Bancorporation and
AmSouth Bank
P. O. Box 11007
1900 5^th Avenue N.
AmSouth Center
Birmingham, Alabama 35288

Miscellaneous

        13. Notwithstanding any provision of this Order to the contrary, the Reserve Bank and the Superintendent may, in their sole discretion, grant written extensions of time to AmSouth and the Bank to comply with any provision of this Order.

        14. The provisions of this Order shall be binding upon AmSouth and the Bank and all of their institution-affiliated parties, in their capacities as such, and their successors and assigns.

        15. Each provision of this Order shall remain effective and enforceable until stayed, modified, terminated or suspended by the Reserve Bank and the Superintendent.

        16. The provisions of this Order shall not bar, estop or otherwise prevent the Board of Governors, the Reserve Bank, the Superintendent or any other federal or state agency from

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taking any other action affecting AmSouth, the Bank or any of their current or former institution-affiliated parties and their successors and assigns.

        17. The Alabama Superintendent of Banks, having duly approved this Cease and Desist Order, and AmSouth and the Bank, through their respective boards of directors, agree that the issuance of this Cease and Desist Order by the Board of Governors shall be binding as between AmSouth, the Bank, and the Alabama Superintendent of Banks to the same degree and legal effect that such Cease and Desist Order would be binding on AmSouth and the Bank if the Alabama Superintendent of Banks had issued a separate Cease and Desist Order that included and incorporated all of provisions of the foregoing Cease and Desist Order pursuant to the provisions of the Code of Alabama Sections 5-2A-12 and 5-13B-11 (1975).

        By order of the Board of Governors of the Federal Reserve System and the Alabama Superintendent of Banks, effective this 12th day of October, 2004.

AMSOUTH BANCORPORATION		BOARD OF GOVERNORS OF THE   FEDERAL RESERVE SYSTEM
By:	/s/ T. Kurt Miller	By:	/s/ Jennifer J. Johnson
	T. Kurt Miller General Counsel		Jennifer J. Johnson Secretary of the Board

AMSOUTH BANK		ALABAMA SUPERINTENDENT OF   BANKS
By:	/s/ T. Kurt Miller	By:	/s/ Anthony Humphries
	T. Kurt Miller General Counsel		Anthony Humphries Superintendent of Banks

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EX-99.4

UNITED STATES OF AMERICA
DEPARTMENT OF THE TREASURY
FINANCIAL CRIMES ENFORCEMENT NETWORK

IN THE MATTER OF
AMSOUTH BANK No. 2004-2

ASSESSMENT OF CIVIL MONEY PENALTY

I.     INTRODUCTION

        The Secretary of the United States Department of the Treasury has delegated to the Director of the Financial Crimes Enforcement Network (“FinCEN”) the authority to determine whether a financial institution has violated the Bank Secrecy Act and its implementing regulations, 31 USC §§5311 et seq. and 31 CFR Part 103 thereunder, and what, if any, sanction is appropriate.

        In order to resolve this matter, and only for that purpose, AmSouth Bank (“AmSouth”) has entered into a CONSENT TO THE ASSESSMENT OF CIVIL MONEY PENALTY (“CONSENT”) dated October 12, 2004, without admitting or denying FinCEN’s determinations described in Sections III and IV below, except as to jurisdiction in Section II below, which is admitted.

        The CONSENT is incorporated into this ASSESSMENT OF CIVIL MONEY PENALTY (“ASSESSMENT”) by this reference.

II.     JURISDICTION

        AmSouth is a subsidiary of AmSouth Bancorporation, a publicly traded company. Both entities are based in Birmingham, Alabama. As of December 31, 2003, AmSouth Bancorporation had assets of approximately $45.6 billion, deposits of $30.4 billion, and stockholders’ equity of $3.2 billion. AmSouth is a “financial institution” and a “bank” within the meaning of 31 USC §5312(a)(2) and 31 CFR §103.11. The Board of Governors of the Federal Reserve System (the “Federal Reserve”) is AmSouth’s primary federal supervisory agency and examines AmSouth for Bank Secrecy Act compliance.

III.     FINCEN’S DETERMINATIONS

        A. Summary of Violations

        FinCEN has determined that AmSouth willfully violated the anti-money laundering program and suspicious activity reporting requirements of the Bank Secrecy Act and its implementing regulations. AmSouth failed to develop an anti-money

laundering program tailored to the risks of its business and reasonably designed, as required by law, to prevent the Bank from being used to launder money and finance terrorist activities and to ensure compliance with the Bank Secrecy Act. AmSouth’s program lacked adequate board and management oversight, lacked fully implemented policies and procedures across the Bank to provide for appropriate due diligence and capture of suspicious activity information, lacked adequate training to ensure compliance, and had a materially deficient internal audit process that failed to detect these inadequacies. The result was a fragmented program in which areas of the Bank had information on suspicious activity that was never communicated to those responsible for Bank Secrecy Act compliance. These systemic deficiencies in AmSouth’s anti-money laundering program resulted in AmSouth’s failure to timely file suspicious activity reports in circumstances where the Bank was aware of suspicious activity by its customers. FinCEN has concluded that these failures warrant a civil penalty, to be assessed concurrently with the civil penalty by the Federal Reserve. Concurrently with this CONSENT, the Federal Reserve is entering into a comprehensive Cease and Desist Order and Order of Assessment of a Civil Money Penalty with AmSouth requiring, in addition to payment of a civil penalty, corrective action to bring AmSouth into compliance with its Bank Secrecy Act obligations.

      B. Violations of the Anti-Money Laundering Program Requirements

        FinCEN has determined that, since April 24, 2002, AmSouth has been in violation of the anti-money laundering program requirements of the Bank Secrecy Act. Every bank was required to establish an anti-money laundering program by April 24, 2002, that guards against money laundering and terrorist financing and ensures compliance with the Bank Secrecy Act and its implementing regulations. 31 USC §5318(h)(1) and 31 CFR §103.120. A bank regulated by a federal functional regulator is deemed to have satisfied these requirements if it develops and maintains an anti-money laundering program that complies with the regulation of its federal functional regulator governing such programs. 31 CFR §103.120. The Federal Reserve requires each bank under its supervision to establish and maintain a Bank Secrecy Act compliance program that, at a minimum: (a) provides for a system of internal controls to ensure ongoing compliance; (b) designates an individual or individuals responsible for coordinating and monitoring day-to-day compliance; (c) provides training for appropriate personnel; and (d) provides for independent testing for compliance conducted by bank personnel or an outside party. 12 CFR §208.63.

        During its June 2004 examination of the Bank, the Federal Reserve Bank of Atlanta identified deficiencies in AmSouth’s anti-money laundering program. FinCEN has determined that AmSouth’s program was materially deficient in three of the four required elements. Specifically, AmSouth’s anti-money laundering program had deficient internal controls that lacked sufficient policies and procedures to guide and direct the activities of its employees, ineffectively used the automated systems in place to monitor for suspicious activity across the enterprise, and lacked adequate board and management oversight. AmSouth’s employee training was insufficient, with both management and staff lacking a clear understanding of their obligations and how to

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accomplish them. Finally, the independent audit function was inadequate. These deficiencies are described in further detail below.

          1. Internal Controls

        AmSouth failed to develop and implement adequate internal policies, procedures, and controls to ensure compliance with the Bank Secrecy Act and its implementing regulations. AmSouth did not meet its legal obligations to assess the Bank’s risks or vulnerabilities to money laundering and terrorist financing and to tailor its policies, procedures, and controls accordingly. With the exception of its private banking line of business, AmSouth failed to conduct a risk assessment of its customer base to identify categories of high-risk customers, products, and geographic locations. The Bank lacked procedures to identify and monitor customers with cash-intensive activity to determine if the activity was suspicious. This due diligence failure resulted in the Bank’s inability to tailor its due diligence procedures as appropriate to the varying degrees of risk posed by its customers, including the creation of enhanced due diligence procedures where warranted. It also prevented AmSouth from developing a method for monitoring the transactions of high-risk customers to determine if the actual activity was commensurate with expected activity and/or lacked any apparent business or legal purpose.

        The Bank’s anti-money laundering program lacked adequate internal controls and procedures to integrate information generated by a number of the Bank’s units and departments that was necessary to enable the performance of appropriate due diligence, including compliance with Section 314(a) of the Patriot Act. Specifically, systems used at the Bank’s branches for recording monetary instruments sold to non-accountholders were not fully integrated with the Bank’s system for responding to requests sent by FinCEN under Section 314(a) of the Patriot Act. Despite the fact that such records must be maintained for Bank Secrecy Act compliance, the Bank could not determine whether the scope of its Section 314(a) searches was adequate for monetary instrument transactions.¹ Information maintained, and reports generated in various departments not directly involved in Bank Secrecy Act compliance, but which nevertheless inform the Bank of suspicious activity occurring within it (e.g., in litigation reports, fraud and loss prevention monitoring), were not regularly provided to Bank Secrecy Act compliance or Corporate Security personnel for appropriate action. For example, the Legal Department had no system in place to alert Bank Secrecy Act compliance personnel to subpoenas and information requests it received from law enforcement. In certain other cases, it did not provide information to the Bank Secrecy Act compliance or Corporate Security personnel about suspicious activity obtained through litigation activity and reports generated from it, which was used only to monitor and manage litigated cases. Many of the departments within AmSouth lacked adequate procedures and guidance regarding the delivery of information to appropriate personnel for suspicious activity determinations.

        AmSouth failed to develop and implement policies, procedures, and internal controls adequate to ensure the referral, investigation, and reporting of suspicious

_________________

¹ This issue will be resolved and addressed in the course of the remedial actions by the Bank.

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transactions. In fact, AmSouth’s policies and procedures lacked meaningful information on what constitutes a reportable event or the procedures to be followed in investigating and reporting suspicious transactions. Written procedures establishing criteria for, and directing employee decisions on, when to administratively close a referral or conduct an investigation and when to file a SAR were inadequate.

        Finally, reporting to management for the purposes of monitoring and oversight of compliance activities was materially deficient. AmSouth lacked written procedures for the preparation of reports to senior management and the security director. Further, the reporting that did exist focused heavily on loss detection and prevention, to the detriment of Bank Secrecy Act compliance. Without adequate reporting, board and senior management committees responsible for overseeing some or all of the suspicious activity identification and reporting process could not be effective.

          2. Training Appropriate Personnel

        AmSouth management and staff lacked sufficient understanding of their Bank Secrecy Act compliance obligations in large part because of an inadequate training program. Before February 2004, AmSouth did not provide bank-wide training for detecting and reporting fraud and other forms of suspicious activity for employees. Suspicious activity reports were not filed because the business units were never instructed on what activity warrants reporting. Many employees did not understand their obligations. In fact, some personnel operated under the misapprehension that suspicious activity reports were not required to be filed unless there was a loss to the Bank, leading to failures in reporting that are discussed infra. Employees lacked sufficient knowledge and experience to detect and report suspicious activity.

          3. Independent Testing for Compliance

        AmSouth’s independent testing for compliance with the Bank Secrecy Act and its implementing regulations was materially inadequate. AmSouth conducted its first ever enterprise-wide internal audit of Bank Secrecy Act compliance in 2003. However, the scope of AmSouth’s review of suspicious activity identification, investigation, and filing procedures in the 2003 internal audit was inadequate and limited to a “reasonableness and completeness” check of suspicious activity reports that were actually filed. As a result, the audit did not review detection and monitoring reports, sample and test potentially suspicious accounts, or render an opinion, general or otherwise, on the overall adequacy of AmSouth’s anti-money laundering program with respect to detecting, monitoring and reporting suspicious activity. The internal audit did not evaluate monitoring parameters to determine if they were appropriate or effective. The auditors did not confirm whether all accounts reflected on the monitoring reports received by compliance personnel were actually analyzed and resulted in either suspicious activity report filings or adequate notations of the reasons that the activity did not merit a suspicious activity report. No accounts were independently sampled or tested for identification of suspicious activity. The audit thus was incapable of determining the adequacy of the procedures for monitoring, detecting, and reporting suspicious activity.

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Management’s review of, and quality assurance over, the audit work performed, the findings documented, and the conclusions rendered were inadequate.

        In summary, AmSouth failed to develop and maintain a Bank Secrecy Act compliance program appropriate for the size and complexity of its business in violation of 12 CFR §208.63 and, thus, failed to establish and implement an adequate anti-money laundering program in violation of §5318(h)(1) of the Bank Secrecy Act and its implementing regulation, 31 CFR §103.120. AmSouth’s inadequate anti-money laundering program resulted in violations of the suspicious activity reporting requirements of the Bank Secrecy Act, as discussed below.

      C. Violations of the Suspicious Activity Reporting Requirements

        FinCEN has determined that AmSouth violated the suspicious activity reporting requirements of the Bank Secrecy Act and its implementing regulations set forth in 31 USC §5318(g) and 31 CFR §103.18. Because of AmSouth’s inability to identify or monitor high-risk customers or transactions effectively, the Federal Reserve’s June 2004 examination could not identify all transactions meriting the filing of a suspicious activity report. The Cease and Desist Order that AmSouth is entering into with the Federal Reserve simultaneously with this CONSENT will require AmSouth to continue its implementation of procedures to identify such circumstances and make the appropriate filings. However, FinCEN has identified examples of significant instances of suspicious activity known to the Bank, on which suspicious activity reports should have been, but were not filed, which are discussed below.

          1. Suspicious Activity Reporting Requirements

        A bank must report any transaction involving or aggregating to at least $5,000 that it “knows, suspects, or has reason to suspect” (i) involves funds derived from illegal activities or is conducted to disguise funds derived from illegal activities, (ii) is designed to evade the reporting or recordkeeping requirements of the Bank Secrecy Act (e.g., structuring transactions to avoid currency transaction reporting), or (iii) “has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the bank knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction.” 31 USC §5318(g) and 31 CFR §103.18. A bank must file a report no later than 30 calendar days after the date of initial detection of facts that may constitute a basis for filing. 31 CFR §103.18(b) (3) and Instructions to Suspicious Activity Report Form, TD F 90-22.47. If no suspect is identified on the date of the detection of the incident requiring the filing, a bank may delay filing a report for an additional 30 calendar days to identify a suspect. In no case is reporting to be delayed more than 60 calendar days after the date of initial detection of a reportable transaction. In cases requiring immediate attention, a bank should notify law enforcement of the activity by telephone, but such notification does not relieve the bank of its obligation to file a suspicious activity report.

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        To comply with these rules, a bank must be able to determine whether transactions are in fact reportable. Therefore, a bank is required to have in place systems to identify the kinds of transactions and accounts that may be of a high risk for money laundering or that exhibit indicia of suspicious activity, considering the type of products and services it offers and the nature of its customers. Otherwise, a bank cannot assure that it is in fact reporting suspicious transactions as required by the Bank Secrecy Act. In this case, the record shows that AmSouth had information about its customers and their transactions that caused it to “know, suspect, or have reason to suspect” that certain transactions were reportable suspicious transactions. However, AmSouth failed to report these transactions or delinquently reported them because its procedures to identify, analyze, and report suspicious activity were inadequate. As a result, AmSouth violated 31 USC §5318(g) and 31 CFR §103.18.

          2. Basic Deficiencies in Suspicious Activity Reporting Procedures and Filings

        As a result of the defects in its anti-money laundering program described above, AmSouth regularly failed to identify for review accounts in which suspicious activity might be occurring. Even when personnel at the various business units had knowledge of suspicious activity in certain accounts, the Bank’s lack of training and/or referral procedures often prevented this information from being brought to the attention of the persons responsible for suspicious activity reporting. In some instances, Bank personnel incorrectly believed that reporting was not required because there was no loss to AmSouth. In other instances, certain Bank personnel would not file suspicious activity reports on activity that had been telephonically reported to law enforcement.² The lack of management oversight and review of the program exacerbated these problems.

          3. Examples of AmSouth’s Reporting Violations

        AmSouth failed to timely file suspicious activity reports regarding the following objectively suspicious activity by its customers:

• The perpetrators of a fraudulent investment scheme maintained accounts at AmSouth to handle funds contributed by individual investors. AmSouth did not perform adequate due diligence on the perpetrators, which could have revealed financial and prior regulatory problems. Further, AmSouth ignored red flags, including concerns communicated to Bank management by several employees at various AmSouth branches indicating the accounts were being used in furtherance of a Ponzi scheme. Despite such warnings, AmSouth failed to file a suspicious activity report until two years after it knew or should have known about the suspicious nature of the activity and millions had been deposited and then withdrawn from related accounts at the Bank. The perpetrators ultimately were convicted of money laundering and money laundering conspiracy.

_________________

² Telephonic notice has never been permitted as a substitute for filing a suspicious activity report because all of the information required to be in a report must be available to all appropriate local, state, and federal law enforcement users that might be investigating related crimes or patterns of criminal activity.

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• The Chief Financial Officer of an AmSouth corporate customer embezzled several million dollars from the corporation over three years using forged and improperly authorized checks. Although AmSouth employees noticed that the Chief Financial Officer was conducting a number of highly unusual transactions, the Bank did not file a suspicious activity report because it suffered no loss.

• A municipal official contacted the manager of a local AmSouth branch regarding the suspected misappropriation by another municipal official of approximately $450,000 through the fraudulent endorsement of a number of city checks. Shortly thereafter, the responsible party acknowledged the misappropriation in a suicide note. Nonetheless, AmSouth did not file a suspicious activity report because the suspect was dead. Another municipal employee was eventually indicted for his role in the fraud.

• Another matter involved an employee of AmSouth’s broker-dealer who allegedly committed fraud in clients’ accounts by, among other things, forging customer signatures on numerous documents. The broker-dealer reported this employee’s misconduct to the National Association of Securities Dealers (“NASD”). The broker-dealer also had a duty to report what it knew to be suspicious activity by its own employee to FinCEN, and it failed to do so. AmSouth now acknowledges that a SAR should have been filed in this matter, and recently filed a SAR.

• An employee of a car dealership formed his own corporation and then opened an account at AmSouth under the name of the corporation “dba” (doing business as) the name of the car dealership. Over a year, the employee deposited several hundred thousand dollars worth of checks made payable to his employer into the AmSouth account. The employer ultimately sued AmSouth concerning these transactions. AmSouth handled the litigation without conducting a review to determine whether a SAR should be filed.

• An individual operated a fraudulent multi-million dollar trading operation for five years before being arrested. More than $20 million in assets from investors in the program were frozen in various banks, including AmSouth. AmSouth received Securities and Exchange Commission and grand jury subpoenas seeking information on the matter. Months after the individual pleaded guilty to felony charges of securities fraud, money laundering and wire fraud, AmSouth closed the last of his accounts without ever having filed a suspicious activity report.

• A corporate customer deposited into its AmSouth account an official check for $220,000 drawn on another U.S. bank. Six days later, the customer initiated a wire transfer of $190,000 from its AmSouth account to a bank in a foreign country. All but $30,000 of the wired funds were then withdrawn from the foreign bank. Nine days after its deposit, the check was returned unprocessed to AmSouth because the amount had been altered. Although AmSouth notified local

7

law enforcement of the incident, and fully cooperated with the government investigation, it did not file a suspicious activity report.

• A bank cashier at another bank embezzled money from his employer by wiring funds from an account maintained by his employer to deposit accounts at AmSouth held in his or his wife’s name. The bank cashier then invested these funds in investment accounts at AmSouth’s broker-dealer subsidiary. The employer contacted AmSouth about the bank cashier’s accounts. Although AmSouth notified federal law enforcement of the incident, it never filed a suspicious activity report.

        In addition, the Federal Reserve’s June 2004 examination disclosed that AmSouth had not filed suspicious activity reports on a number of instances of check kiting activity involving possible losses above $5,000, which appeared on an AmSouth internal report. In response to the examination, AmSouth has now filed suspicious activity reports on several of the matters identified by the Federal Reserve. Various cases involving fraudulent activity by customers of the bankcard business unit, and matters identified by the fraud prevention unit, also were not reported.

      D. Willful Nature of BSA Violations

        The conduct of a bank may be characterized as willful if it demonstrates a reckless disregard for its obligations under law or regulation. As a bank supervised by the Federal Reserve, AmSouth was aware of the anti-money laundering program and suspicious activity reporting requirements of the Bank Secrecy Act and its implementing regulations. AmSouth had material deficiencies in the basic elements of its anti-money laundering program, which led to violations of the suspicious activity reporting requirements in a number of significant instances. These violations were systemic and serious. FinCEN has determined that AmSouth’s violations of the Bank Secrecy Act and its implementing regulations were willful.

IV.     CIVIL MONEY PENALTY

        FinCEN has determined that by failing to establish and implement an adequate anti-money laundering program and to file and file timely suspicious activity reports as described in Section III, above, the AmSouth willfully violated the anti-money laundering program and suspicious activity reporting provisions of the Bank Secrecy Act and its implementing regulations a civil money penalty is due pursuant to 31 USC §5321 and 31 CFR §103.57(f).

V.     CONSENT TO ASSESSMENT

        In order to resolve this matter, and only for that purpose, AmSouth, without admitting or denying either the facts or determinations described in Sections III and IV above, except as to jurisdiction in Section II, which is admitted, consents to the assessment of a civil money penalty against it in the sum of $10 million. This penalty assessment shall be concurrent with the $10 million penalty assessed against AmSouth by

8

the Federal Reserve. The penalty assessment of FinCEN and the Federal Reserve referenced above shall be satisfied by one payment of $10 million to the Department of the Treasury.

        AmSouth agrees to pay the amount of $10 million upon the assessment of the civil money penalty. Such payment shall be:

a. made by certified check, bank cashier’s check, or bank money order or by wire;

b. made payable to the United States Department of the Treasury;

c. evidenced by a check or money order or copy of the wire transfer, hand-delivered or sent by overnight mail to Nicholas A. Procaccini, Acting Associate Director, Administration and Communications, FinCEN, 2070 Chain Bridge Road, Suite 200, Vienna, Virginia 22182; and

d. submitted under a cover letter, which references the caption and file number in this matter.

        AmSouth recognizes and states that it enters into the CONSENT freely and voluntarily and that no offers, promises, or inducements of any nature whatsoever have been made by FinCEN or any employee, agent, or representative of FinCEN to induce AmSouth to enter into the CONSENT, except for those specified in the CONSENT.

        AmSouth understands and agrees that the CONSENT embodies the entire agreement between AmSouth and FinCEN relating to this enforcement matter only, as described in Section III above. AmSouth further understands and agrees that there are no express or implied promises, representations, or agreements between AmSouth and FinCEN other than those expressly set forth or referred to in the CONSENT and that nothing in the CONSENT or this ASSESSMENT is binding on any other agency of government, whether federal, state, or local.

VI.     RELEASE

        AmSouth understands that its execution of the CONSENT and compliance with the terms of this ASSESSMENT and the CONSENT constitute a complete settlement of civil liability for reporting and recordkeeping violations of the Bank Secrecy Act, and the regulations promulgated thereunder, which were identified by the Federal Reserve prior to the date hereof.

By:	/s/ William J. Fox
	William J. Fox, Director FINANCIAL CRIMES ENFORCEMENT NETWORK U.S. Department of the Treasury

Date:   October 12, 2004

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