Saddle River Valley Bank of Montclair, N.J., which agreed last month to pay $8.2 million to settle federal claims that it violated U.S. anti-money laundering laws, likely was plagued by a lack of banking experience among its investors and pressure to be profitable.

Ballard Spahr partner Beth Moskow-Schnoll, who has experience representing small banks, said such institutions often are run by people who view them as good investments and as a way to get involved in the community, but who don't understand what it is like to be working in a regulated environment. She said competitive pressures also likely played a role in the bank's problems.

"It is hard for little banks or community banks to compete in this world," Ms. Moskow-Schnoll said. "They’re more likely to put out riskier products and engage in riskier services because they need the money. It is a recipe for disaster unless they have the proper controls in place."

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Consumer Financial Services