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03/28/2024

U.S. sanctions Hamas-aligned fundraisers and actors financing DPRK weapons

Yesterday, the Treasury Department announced that OFAC, in coordination with the Republic of Korea (ROK), has sanctioned six individuals and two entities based in Russia, China, and the United Arab Emirates that generate revenue and facilitate financial transactions for the Democratic People’s Republic of Korea (DPRK). Funds generated through these actors are ultimately funneled to support the DPRK’s weapons of mass destruction (WMD) programs.

The Department also reported OFAC has designated two individuals and three entities as key financial facilitators involved in fundraising for Hamas.

For the names and identification information of the designated parties, see ourMarch 27, 2024, BankersOnline OFAC Update.

03/27/2024

FDIC issues guidance to help FIs and facilitate recovery

Yesterday, the FDIC issued Financial Institution Letters FIL-13-2024 and FIL-14-2024 to provide guidance the help financial institutions and facilitate recovering in areas of Maine and Rhode Island, respectively, affected by severe storms and flooding December 17–19, 2023 (Rhode Island) and January 9–13, 2024 (Maine and Rhode Island).

03/27/2024

CFPB joins federal and state agencies in coordinated statements

The CFPB on Tuesday reported it has joined federal and state agencies in releasing agency-specific action statements on tech capacity. These statements reflect concrete actions to increase tech capacity, including actively hiring technologists, that will help enforce the laws on the book and design remedies that work for consumers, workers, small businesses, and others in the digital era.

The Bureau released a statement from CFPB Director Rohit Chopra and Chief Technologist Eric Meyer and a statement from the Federal Trade Commission.

03/27/2024

HMDA modified LARs with 2023 data are available

The CFPB has announced that the modified HMDA LARs with 2023 data are now available for each institution that filed HMDA data collected in 2023. The modified LARs provide each financial institution's loan-level HMDA data, as modified to protect applicant and borrower privacy in accordance with the Consumer Financial Protection Bureau’s final policy guidance on the disclosure of HMDA data. Users also have the ability to download one combined file that contains all institutions’ modified LAR data.

The modified LARs can be accessed HERE.

03/27/2024

OFAC actions announced

Yesterday, the Treasury Department reported that OFAC had sanctioned six entities, one individual and two tankers that are based or registered in Liberia, India, Vietnam, Lebanon, and Kuwait that have engaged in facilitating commodity shipments and financial transactions for the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF), the Houthis, and Hizballah.

Treasury also reported that OFAC had sanctioned 11 individuals and entities supporting the regime of Syrian President Bashar Al-Assad through the facilitation of illicit financial transfers and trafficking of illegal drugs, as well as the extraction and export of Syrian commodities.

For the names and identification information of the designated individuals, entities, and vessels, see our March 26, 2024, BankersOnline OFAC Update.

03/27/2024

FATF upgrades U.S. to largely compliant on beneficial ownership

The Treasury Department has reported that the Financial Action Task Force—the global standard-setting body for anti-money laundering, countering the financing of terrorism, and countering proliferation financing (AML/CFT/CPF)—announced that the United States has been upgraded to “largely compliant” with FATF Recommendation 24, which relates to beneficial ownership transparency for legal persons.

The FATF published the updated rating in the Seventh Enhanced Follow-Up Report of the United States, recognizing Treasury’s historic efforts to increase beneficial ownership transparency and address key vulnerabilities in the U.S. AML/CFT framework.

03/27/2024

FHFA: House prices dropped in January

The Federal Housing Finance Agency yesterday reported U.S> house prices fell in January, down 0.1 percent from December, according to the FHFA seasonally adjusted monthly House Price Index.

House prices rose 6.3 percent from January 2023 to January 2024. The previously reported 0.1 percent price increase in December remained unchanged.

For the nine census divisions, seasonally adjusted monthly price changes from December 2023 to January 2024 ranged from -0.6 percent in the South Atlantic division to +1.5 percent in the West North Central division. The 12-month changes were all positive, ranging from +3.8 percent in the West South Central division to +8.7 percent in the East North Central division.

03/26/2024

Hsu discusses fairness and compliance risk management

The OCC has reported that Acting Comptroller of the Currency Michael J. Hsu yesterday discussed fairness and effective compliance risk management in remarks at CBA LIVE 2024, hosted by the Consumer Bankers Association. Mr. Hsu discussed how banks can improve their ability to anticipate and adapt to emerging compliance risk issues by elevating and developing a strong internal sense of fairness.

03/26/2024

HUD charges Texas housing authority with disability discrimination

The U.S. Department of Housing and Urban Development announced yesterday that the agency has charged the Grapevine Housing Authority (“GHA”); Jane Everett, Executive Director of GHA; and Bonnie McHugh, Vice-Chair of the GHA Housing Commission, with discriminating against, and failure to provide a reasonable accommodation for a tenant with a disability.

HUD’s Charge of Discrimination alleges that the Grapevine Housing Authority, Ms. Everett, and Ms. McHugh terminated the lease of a tenant with diabetes following a medical episode caused by his blood sugar levels. They subsequently denied his reasonable accommodation request and continued eviction proceedings against him even after his doctor had provided evidence that his symptoms were managed following a change in medication and purchase of a medical alert bracelet.

A United States Administrative Law Judge will hear HUD’s charge unless any party to the charge elects to have the case heard in federal district court.

03/26/2024

OFAC sanctions Russian companies and Chinese hackers

Yesterday, the Treasury Department reported that OFAC had sanctioned thirteen entities and two individuals for operating in the financial services and technology sectors of the Russian Federation economy including persons developing or offering services in virtual assets that enable the evasion of U.S. sanctions. Five entities were designated for being owned or controlled by OFAC-designated persons.

Treasury also reported that OFAC had sanctioned Wuhan Xiaoruizhi Science and Technology Company, Limited (Wuhan XRZ), a Wuhan, China-based Ministry of State Security (MSS) front company that has served as cover for multiple malicious cyber operations. OFAC also designated Zhao Guangzong and Ni Gaobin, two Chinese nationals affiliated with Wuhan XRZ, for their roles in malicious cyber operations targeting U.S. entities that operate within U.S. critical infrastructure sectors, directly endangering U.S. national security.

For the names and identification information of all the designated parties, see the March 25, 2024, BankersOnline OFAC Update.

03/26/2024

FHFA releases 4th quarter 2023 foreclosure prevention and refi report

The Federal Housing Finance Agency (FHFA) has released its fourth quarter 2023 Foreclosure Prevention and Refinance Report. The report shows that Fannie Mae and Freddie Mac (the Enterprises) completed 43,903 foreclosure prevention actions during the quarter, raising the total number of homeowners who have been helped to 6,905,703 since the start of conservatorships in September 2008.

The report also shows that 31 percent of loan modifications completed in the fourth quarter reduced borrowers’ monthly payments by more than 20 percent. The number of refinances decreased from 83,522 in the third quarter of 2023 to 71,378 in the fourth quarter of 2023.

The Enterprises’ serious delinquency rate increased slightly from 0.54 percent to 0.55 percent at the end of the fourth quarter. This compares with 3.42 percent for Federal Housing Administration (FHA) loans, 2.01 percent for Veterans Affairs (VA) loans, and 1.52 percent for all loans (industry average).

03/25/2024

FDIC special committee adds three non-voting members

The FDIC has announced that the Special Committee of its Board has appointed three non-voting members in its efforts to oversee an independent, third-party review of the agency's workplace culture:

  • Linda Miller, the CEO of Audient Group, a services firm specializing in anti-fraud solutions for commercial and government clients
  • Elizabeth McCaul, a member of the Supervisory Board of the European Central Bank
  • Valerie Mosley, the founder of BrightUp and Valmo Ventures and a member of the board of directors of several large companies and the New Profit Social Venture Fund

The Special Committee intends to complete its independent review in the second quarter of 2024.

03/25/2024

FFIEC updating UBPR to include CECL nomenclature changes in Call Reports

FFIEC announcement 2024-02, issued on Friday, reports that the FFIEC's member agencies are making several changes to the Uniform Bank Performance Report on or shortly after March 25, 2024. These changes are necessitated by the current expected credit losses methodology (CECL) nomenclature changes to the March 2024 Consolidated Reports of Condition and Income (Call Reports). Changes are also being made in response to the Accounting Standards Update 2022–02, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.”

03/25/2024

FHFA issues 2023 Q4 UAD aggregate stats

The Federal Housing Finance Agency on Friday published its 2023 fourth-quarter data for the Uniform Appraisal Dataset (UAD) Aggregate Statistics. The Data File and Dashboards also include new property characteristics and a new statistic.

The UAD Aggregate Statistics Data File and Dashboards give stakeholders and the public continued access to a broad set of data points and trends found in appraisal reports. Today’s release includes the full year of 2023 data at all geographic levels (National, State, County, Metropolitan Statistical Area, and Census Tract). The data also now include six new measures of property structure and site, three new measures of neighborhood market conditions, and one new value statistic.

03/25/2024

Treasury targets Sinaloa fentanyl network

On Friday, Deputy Secretary of the Treasury Wally Adeyemo announced, alongside local leaders and law enforcement in Arizona, that OFAC had sanctioned operatives in a Black Market Peso Exchange scheme to launder millions in illicit fentanyl proceeds for the Sinaloa Cartel. OFAC designated 15 Sinaloa Cartel members—several of whom are fugitives—and six Mexico-based businesses pursuant to Executive Order (E.O.) 14059. The Sinaloa Cartel, which is one of the most notorious and pervasive drug trafficking organizations in the world, is responsible for a significant portion of the illicit fentanyl and other deadly drugs trafficked into the United States.

For the names and identification information of the designated parties, see the March 22, 2024, BankersOnline OFAC Update.

03/22/2024

FDIC proposes updates to policy statement on bank mergers

The FDIC has announced its Board of Directors yesterday approved a request for public comment on proposed revisions to the agency's Statement of Policy on Bank Merger Transactions.

The revised Statement of Policy (SOP) reflects legislative and other developments that have occurred since it was last amended in 2008, including the establishment of the statutory factor regarding the risk to the stability of the United States banking or financial system. The revised SOP is principles based; describes the types of applications subject to FDIC approval; addresses each statutory factor separately; and highlights other relevant matters and considerations, such as related statutes pertaining to interstate mergers, and applications from non-banks or banks that are not traditional community banks. Further, the revised SOP reflects consideration of comment letters received in response to the FDIC’s March 2022 Request for Information and Comment on Rules, Regulations, Guidance, and Statements of Policy Regarding Bank Merger Transactions.

Comments on the proposed revised Statement of Policy will be accepted for 60 days following publication in the Federal Register.

03/22/2024

Agencies postpone applicability dates on some parts of CRA update rule

Just eleven days before the effective date of most provisions of their revised Community Reinvestment Act regulations issued in October 2023 (published on February 1, 2024), the Federal Reserve Board, OCC, and FDIC have jointly announced a supplemental interim final rule that extends the applicability date of certain provisions.

To promote clarity and consistency, the agencies extended the applicability date of the facility-based assessment areas and public file provisions from April 1, 2024, to January 1, 2026. Therefore, banks will not have to make changes to their assessment areas or their public files as a result of the 2023 CRA final rule until January 1, 2026. This extension aligns these provisions with other substantive parts of the 2023 CRA final rule that are applicable on January 1, 2026. For example, all provisions about where banks are evaluated will now apply on the same date. Comments on the extended applicability date must be received 45 days after the rule is published in the Federal Register.

The supplemental interim final rule, which becomes effective on April 1, 2024, also includes technical, non-substantive amendments to the CRA final rule and related agency regulations that reference it. For example, one of these technical amendments clarifies that banks do not need to make changes to their public notices until January 1, 2026.

Federal Reserve Board Governor Michelle W. Bowman, who has criticized the October 2023 rule as "unnecessarily complex and extraordinarily lengthy," issued a statement of concern that the change announced yesterday "will not be the only significant issue that will require further consideration given the length and complexity of the final rule as the agencies continue to work toward implementation of the changes. ... This interim final rule illustrates the rushed, overly complex, and unwieldy nature of the CRA rulemaking."

03/21/2024

Treasury announces OFAC actions

Yesterday, the Treasury Department announced that OFAC had targeted three procurement networks –– based in Iran, Türkiye, Oman, and Germany –– that have supported Iran’s ballistic missile, nuclear, and defense programs.

The Treasury Department also reported that OFAC had designated two individuals and two entities for services they provided the Government of the Russian Federation in connection with a foreign malign influence campaign, including attempting to impersonate legitimate media outlets.

For the names and identification information of the designated parties, see the March 20, 2024, BankersOnline OFAC Update.

03/21/2024

OCC reports March 2024 enforcement actions

The OCC has released enforcement actions that it took during the month of March 2024:

  • Its previously announced Cease and Desist Order and $250 million Civil Money Penalty against JPMorgan Chase Bank, N.A., for deficiencies in its trade surveillance program.
  • An Order of Prohibition against Samantha Cherry, Former Manager at a St. Louis, Missouri, branch of UMB Bank, N.A., Kansas City, Missouri, for embezzling $439,000 in cash from the bank.
  • A Personal Cease and Desist Order and $30,000 Civil Money Penalty against Nicholas Jurun, Former Mortgage Loan Originator and Sales Manager at a Rancho Palos Verdes office of Barrington Bank & Trust Company, N.A., Barrington, Illinois, for making payments to receive referrals for mortgage loans, attempting to hide at least two of these payments from the bank with false documentation, and engaging in a conflict of interest.
  • An Order of Prohibition and $150,000 Civil Money Penalty against Thomas Lopp, Former President, Chief Operating Officer, and Chief Financial Officer, Sterling Bank and Trust, FSB Southfield, Michigan, for failing to appropriately oversee the bank’s operation of its Advantage Loan Program, supervise bank employees, and intervene when an individual who was not a bank officer issued directives to bank employees and otherwise participated in bank operations.
  • An Order of Prohibition against Elijah V. McBride-Bey, Former Personal Banker, at a North Waltham, Massachusetts, branch of Santander Bank, N.A., Wilmington, Delaware, for establishing unauthorized online banking access and using that access to make unauthorized withdrawals totaling approximately $11,140 from an elderly customer’s account.
  • An Order of Prohibition and $120,000 Civil Money Penalty against Michael Montemayor, Former President of Retail and Commercial Banking, Sterling Bank and Trust, FSB, Southfield, Michigan, for failing to appropriately oversee the bank’s operation of its Advantage Loan Program, and appropriately supervise bank employees, or escalate concerns to the board’s attention.
  • An Order of Prohibition against Juan F. Velez Restrepo, Former Personal Banker at a New York branch of Citibank, N.A., Sioux Falls, South Dakota, for abusing his access to an elderly bank customer’s account and misappropriating over $166,000 in customer funds.

03/21/2024

FHFA housing finance techsprint

The Federal Housing Finance Agency has announced its second TechSprint, an in-person team-based problem-solving event hosted by its Office of Financial Technology. The FHFA’s Generative Artificial Intelligence (AI) in Housing Finance TechSprint will bring together technology, regulatory, housing, and consumer finance experts to identify use cases (or specific scenarios) and associated control measures to support the responsible use of generative AI in the housing finance system.

The TechSprint will begin on Monday, July 22, in Washington, D.C. The event consists of three days of intensive, in-person collaboration. FHFA will select participants from the applicant pool and place individual participants into TechSprint teams that reflect a diverse set of experiences and expertise. Teams will then work on select problem statements that address the central question: “How might the responsible use of generative AI promote a transparent, fair, equitable, and inclusive housing finance system, while fostering sustainable homeownership and rental opportunities?” The event will culminate in a Demo Day exhibition on Thursday, July 25, when the teams will present their innovative ideas to an independent panel of judges drawn from experts in government, industry, nonprofits, and academia for evaluation and potential recognition.

03/21/2024

OCC opens registration for Project REACh summit on financial inclusion

The OCC has announced that registration is open for its Project REACh Financial Inclusion Summit on May 29-30, 2024, at its headquarters in Washington, D.C.

The OCC’s Project REACh, or the Roundtable for Economic Access and Change, brings together leaders from the banking industry, national civil rights organizations, business, technology, and community development to identify and reduce specific barriers that prevent underserved and minority communities from full, equal, and fair participation in the nation’s economy.

Registration is required to attend the Summit and is open until May 15, 2024, or until full, whichever occurs first. For security reasons, attendees will be subject to screening and must present a valid government-issued identification to enter the building.

The Summit will be recorded, and the video will be posted to OCC.gov.

Information on how to register to attend the Summit and the agenda are available on the Summit's webpage.

03/20/2024

Outlook Live event rescheduled

The Philadelphia Federal Reserve Bank has reported that the Outlook Live event, Compliance Resources, Learning Where to Find Answers to Your Compliance Questions, originally scheduled for March 20, 2024, has been rescheduled for Wednesday, April 17, 2024.

Those who preregistered for the March session do not have to re-register. Additional registrations can be made HERE.

03/20/2024

OCC reports mortgage performance for 4th quarter of 2023

The OCC has reported on the performance of first-lien mortgages in the federal banking system during the fourth quarter of 2023.

The OCC Mortgage Metrics Report, Fourth Quarter 2023 showed that 97.2 percent of mortgages included in the report were current and performing at the end of the quarter, an increase from the 97.1 percent in fourth quarter 2022, and a decrease from the previous quarter’s 97.3 percent. The percentage of seriously delinquent mortgages—mortgages that are 60 or more days past due and all mortgages held by bankrupt borrowers whose payments are 30 or more days past due—increased from the prior quarter; however, it has trended down since the fourth quarter of 2021.

Servicers initiated 8,320 new foreclosures in the fourth quarter of 2023, a decrease from a year earlier and from the previous quarter.

Servicers completed 7,382 modifications during the fourth quarter of 2023, a 0.7 percent decrease from the previous quarter’s 7,436 modifications. Of these 7,382 modifications, 6,416 or 86.9 percent, were “combination modifications”—modifications that included multiple actions affecting the affordability and sustainability of the loan, such as an interest rate reduction and a term extension.

03/20/2024

FDIC demands three companies stop false and misleading statements

The FDIC yesterday announced it has issued letters demanding three companies and certain associated parties cease and desist from making false and misleading statements about FDIC deposit insurance. The FDIC is demanding that PrizePool, Inc., AmeriStar, LLC, and HighLine Gold, LLC take immediate corrective action to address these false or misleading statements. In the case of AmeriStar and HighLine Gold, the FDIC has reason to believe these companies are related entities sharing several of the same principals and the same physical address, and therefore, issued a joint letter to them.

Based upon evidence collected by the FDIC, these companies and certain associated parties made false representations by: (1) stating or suggesting they are FDIC-insured or that certain uninsured financial products are insured by the FDIC; (2) misusing the FDIC name or logo; (3) misrepresenting the nature or extent of deposit insurance; and/or (4) failing to clearly identify the insured depository institutions with which they have a relationship for the placement of customer deposits and into which funds may be deposited. The evidence suggests these misrepresentations are causing harm, or have the potential to cause harm, to consumers.

03/19/2024

Two investment advisers charged for false and misleading statements

The Securities and Exchange Commission has announced settled charges against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for making false and misleading statements about their purported use of artificial intelligence (AI). The firms agreed to settle the SEC’s charges and pay $400,000 in total civil penalties.

According to the SEC’s order against Delphia, from 2019 to 2023, the Toronto-based firm made false and misleading statements in its SEC filings, in a press release, and on its website regarding its purported use of AI and machine learning that incorporated client data in its investment process. For example, according to the order, Delphia claimed that it “put[s] collective data to work to make our artificial intelligence smarter so it can predict which companies and trends are about to make it big and invest in them before everyone else.” The order finds that these statements were false and misleading because Delphia did not in fact have the AI and machine learning capabilities that it claimed. The firm was also charged with violating the Marketing Rule, which, among other things, prohibits a registered investment adviser from disseminating any advertisement that includes any untrue statement of material fact.

In the SEC’s order against Global Predictions, the SEC found that the San Francisco-based firm made false and misleading claims in 2023 on its website and on social media about its purported use of AI. For example, the firm falsely claimed to be the “first regulated AI financial advisor” and misrepresented that its platform provided “[e]xpert AI-driven forecasts.” Global Predictions also violated the Marketing Rule, falsely claiming that it offered tax-loss harvesting services, and included an impermissible liability hedge clause in its advisory contract, among other securities law violations.

Without admitting or denying the SEC’s findings, Delphia and Global Predictions consented to the entry of orders finding that they violated the Advisers Act and ordering them to be censured and to cease and desist from violating the charged provisions. Delphia agreed to pay a civil penalty of $225,000, and Global Predictions agreed to pay a civil penalty of $175,000.

03/19/2024

FHA increases manufactured home loan limits

The Federal Housing Administration has announced new loan limits for its Title I Manufactured Home Loan Program. The increased amounts use new methodologies for calculating and updating the program’s limits, which were announced in a final rule published on February 29, 2024. The increases better align with current market prices and are expected to encourage more lenders to offer the program to homebuyers seeking to purchase manufactured homes and the lots on which they sit. This is the first update to the Title I program loan limits since 2008.

Effective for FHA case numbers assigned on or after March 29, 2024, the new nationwide Title I Manufactured Home Loan Program loan limits are:

  • Combination Loan (Single-section), $148,909
  • Combination Loan (Multi-section), $237,096
  • Manufactured Home Loan (Single-section), $105,532
  • Manufactured Home Loan (Multi-section), $193,719
  • Manufactured Home Lot Loan, $43,377

The FHA will recalculate the program’s loan limits on an annual basis to keep pace with home price changes over time.

03/19/2024

NMLS payments glitch affecting federal users

The NMLS has posted a notice concerning a payment processing issue preventing federal users from submitting payments yesterday. Federal users attempting to make payments received a message indicating NMLS "is currently unavailable" while the processing system was unavailable. Users who received that message yesterday should attempt to complete their payment today.

03/19/2024

ASC hearing addresses appraisal bias

The CFPB yesterday posted a Bureau Blog article, "ASC hearing addresses appraisal bias, highlights deficiencies with The Appraisal Foundation." The article contends that many minority homebuyers and owners "continue to report facing illegal discrimination during the home appraisal process because of their race, national origin, and community demographics."

The Appraisal Foundation sets qualifications for becoming an appraiser and standards for conducting appraisals. CFPB Director Rohit Chopra shared his concerns with fellow financial regulators about whether The Appraisal Foundation can realistically address appraisal bias and other challenges, citing recent developments, including shifting explanations and deficient policies around conflicts of interest. The key issues raised in Director Chopra's comment letter include:

  • Severe deficiencies in The Appraisal Foundation’s conflict of interest policies raise questions about its regulatory decisions
  • The Appraisal Foundation’s insular governance structure favors private interests
  • The Appraisal Foundation’s processes, including the selection of its president, lack transparency

03/19/2024

Two lenders fined $59M; falsely promised fast PPP application processing

The Federal Trade Commission yesterday reported it has taken action against two companies – Biz2Credit and Womply – that made false promises to small businesses seeking to take part in the Paycheck Protection Program (PPP), delaying and sometimes preventing them from obtaining funds they needed to keep their businesses afloat during the COVID-19 pandemic.

The companies have agreed to settle the FTC’s charges against them: Biz2Credit will pay $33 million and Womply will pay $26 million to the FTC for small businesses harmed by their deceptive conduct. These are the largest damages amounts ever secured by the agency under Section 19 of the FTC Act, and include money consumers lost because of the companies’ conduct, even if consumers made no payments directly to the companies.

Biz2Credit, Inc., and its subsidiary, Itria Ventures, have agreed to pay $33 million in damages to settle the Commission’s charges that they deceptively advertised that consumers’ emergency PPP loan applications would be processed in an average of 10-14 business days when, in reality, the average processing took well over a month. The FTC’s complaint alleges that Biz2Credit’s application processing was riddled with delays, and the average processing time was double what the defendants claimed, with tens of thousands of consumers waiting more than two months for a final determination. Even though they were aware of these delays, the defendants continued to make their false timing claims to consumers until nearly the end of the program. The FTC’s complaint also says that Biz2Credit unfairly ignored many consumers’ repeated and urgent pleas to withdraw their loan applications. As a result, the defendants delayed and sometimes even prevented these consumers from obtaining PPP funds elsewhere.

[UPDATE Mar. 26, 2024: A spokesperson for Biz2Credit provided a statement regarding its settlement with the FTC saying, in part, that "Biz2Credit demonstrated to the FTC that its 12-14 business day average processing time estimate for PPP loans was accurate for all bona fide PPP loan applications. Fraudulent and ineligible applications, which took longer to process, were included by the FTC in its calculations. Biz2Credit carefully reviewed and ultimately declined applications that it determined were potentially fraudulent or ineligible under PPP program rules. ... Biz2Credit’s decision to enter into the FTC settlement was a pragmatic business decision given the cost and uncertainty of litigation. There was no admission of wrongdoing by Biz2Credit in the settlement."]

Womply and its CEO, Toby Scammell, have agreed to pay $26 million to settle FTC charges they preyed on small businesses in desperate need of PPP funding. The FTC’s complaint alleges they widely advertised that small businesses – particularly one-person businesses like gig workers – could successfully get PPP funding when they applied through Womply. The complaint charges, however, that more than 60 percent of Womply applications never resulted in funding. Womply and Scammell allegedly also advertised that their automated processes and good customer service would help small businesses secure PPP loans fast. In fact, applicants regularly faced significant issues that slowed down or fully hindered their applications and were often unable to receive customer service assistance they were promised, according to the complaint.

03/18/2024

FinCEN ruling on CIP/CDD for charitable beneficiaries of IRA

On Friday, FinCEN published an administrative ruling regarding Customer Identification Program (CIP) and Customer Due Diligence (CDD) requirements for designated beneficiaries of individual retirement accounts.

In FIN-2024-R001, FinCEN issued a revised response to clarify obligations for broker-dealers that open new accounts for legal entity customers. The ruling was issued in response to a request from a foundation that had been named the beneficiary of an individual retirement account maintained by the broker-dealer. For the foundation to receive the funds, the broker-dealer required the foundation to open a new IRA and submit information required by the broker-dealer's CIP and CDD rules. The foundation asked whether it must comply with identification verification requirements when receiving the distribution of IRA funds inherited as part of a charitable estate.

In the ruling, FinCEN expressed no view on whether the broker-dealer had to open the IRA account to pass the funds to the foundation. It did, however, confirm that, in order to open an account, the broker-dealer would be required to comply with CIP and CDD rules imposed under FinCEN regulations.

03/18/2024

U.S. targets illicit shipments

On Friday, the Treasury Dapartment reported that OFAC had taken action against Marshall Islands-registered shipping company Vishnu Inc., whose vessel, the LADY SOFIA, is involved in illicit shipments to the People’s Republic of China in support of Iran’s Islamic Revolutionary Guard Corps-Qods Force and Houthi financial facilitator Sa’id al-Jamal, who is sanctioned under U.S. counterterrorism authorities.

For identification information on Vishnu Inc. and the LADY SOFIA, see Friday's BankersOnline OFAC Update.

03/15/2024

Swiss global banking group settles with OFAC

OFAC has announced a settlement with EFG International AG, a Switzerland-based global private banking group. EFG has agreed to pay $3,740,442 to settle its potential civil liability for processing 873 securities transactions in apparent violation of the Cuban Asset Control Regulations, the Kingpin Act, and Executive Order 14024. The settlement amount reflects OFAC’s determination that EFG’s apparent violations were voluntarily self-disclosed and were non-egregious. Further details are available in OFAC's enforcement release.

03/15/2024

FDIC Board to meet March 21

The FDIC has announced that its Board of Directors will meet at 10:00 a.m. EDT on March 21, 2024, to consider a memorandum and resolution regarding a proposed statement of policy on bank merger transactions.

The meeting will be open to the public via webcast.

03/15/2024

Fed and OCC fine JPMorgan Chase $348.2M for inadequate monitoring

The Federal Reserve Board yesterday announced it has issued an enforcement action against JPMorgan Chase & Co., and fined the firm approximately $98.2 million for an inadequate program for monitoring firm and client trading activities for market misconduct. The Board's action requires JPMorgan Chase to review and take corrective action to address the firm's inadequate monitoring practices, which occurred between 2014 and 2023.

The Board's action was taken in coordination with the Office of the Comptroller of the Currency. The penalties announced by the Board and the Office of the Comptroller of the Currency total approximately $348.2 million.

The OCC's assessment of a $250 million civil money penalty against JPMorgan Chase Bank, N.A. was also announced yesterday. The OCC reported it found that the bank operated with gaps in trading venue coverage and without adequate data controls required to maintain an effective trade surveillance program.

Generally, trading venues are systems or electronic platforms, operated by investment firms or market operators, that bring together multiple third party buying or selling interests in financial instruments to perform a transaction. The OCC expects banks to perform trade surveillance to monitor the market conduct of its traders and clients as part of its market conduct risk control framework. The OCC found that the bank failed to surveil billions of instances of trading activity on at least 30 global trading venues. These gaps and deficiencies in the bank’s trade surveillance program constitute unsafe or unsound banking practices.

03/15/2024

OCC Office Hours in San Francisco announced

The OCC has announced its Office of Financial Technology (OFT) will hold Office Hours in San Francisco, May 21-22, 2024, to promote responsible innovation in the federal banking system.

Office Hours are one-on-one meetings with OCC’s OFT staff to discuss financial technology (fintech), new products or services, partnering with a bank or fintech company, or other matters related to responsible innovation in the federal banking system. OCC staff will provide feedback and respond to questions. Each meeting will be scheduled for 50 minutes.

Information on how to request a meeting is available on the OCC's Office Hours Event page. To be considered, submit a request by March 30, 2024. The OCC will provide specific meeting times to selected participants following a review of all requests.

03/14/2024

U.S. targets Republika Srpska officials

Yesterday, the Treasury Department reported that OFAC had designated three individuals who have contributed to Specially Designated National (SDN) and Republika Srpska President Milorad Dodik’s efforts to undermine the peace and stability of Bosnia and Herzegovina (BiH) by organizing and executing the commemoration of “Republika Srpska Day” on January 9, 2024, an activity determined to be unconstitutional in BiH. These individuals facilitated Dodik’s efforts to undermine the Dayton Peace Agreement and the authority of the BiH Constitutional Court and the High Representative.

For the names and identification information of the designated individuals, see yesterday's BankersOnline OFAC Update.

03/13/2024

Hsu discusses operational resilience

The OCC has reported that Acting Comptroller Michael J. Hsu yesterday discussed the importance of operational resiliency in remarks at the Institute of International Bankers Annual Washington Conference.

In his remarks, Mr. Hsu discussed the growing risks of disruptions that may impede the provision of financial services or adversely impact systems. He also discussed considerations to strengthen operational resiliency requirements for large banks with critical operations, including third party service providers.

03/13/2024

U.S. targets Al-Ashtar Brigades operatives

The Treasury Department yesterday reported that OFAC has acted in coordination with the Kingdom of Bahrain against key Iran-based operatives and a financial facilitator for designated terrorist group Al-Ashtar Brigades. The Department of State designated Al-Ashtar Brigades as a Foreign Terrorist Organization and a Specially Designated Global Terrorist in 2018.

For the names and identification information of the designated individuals, see yesterday's BankersOnline OFAC Update.

03/12/2024

U.S. targets transnational al-Shabaab money laundering network

The Treasury Department has reported that OFAC has imposed sanctions on 16 entities and individuals who compose an expansive business network spanning the Horn of Africa, the United Arab Emirates (UAE), and Cyprus that raises and launders funds for al-Shabaab, a terrorist group affiliated with al-Qa’ida. Individuals within this network include influential businesspeople in the region that lend financial backing to al-Shabaab, a terrorist group responsible for some of the worst terrorist attacks in East Africa’s modern history. These attacks have claimed the lives of thousands of innocent civilians. These individuals and entities were designated pursuant to Executive Order 13224, as amended, which targets terrorist groups and their enablers.

For the names and identification information of the designated parties, see yesterday's BankersOnline OFAC Update.

03/12/2024

Appeal filed in Corporate Transparency Act case

FinCEN has reported that the Government has filed a Notice of Appeal in National Small Business United v. Yellen. The appeal was filed with the U.S. Court of Appeals for the Eleventh Circuit.

03/11/2024

CFPB shifts 'junk fees' focus to residential mortgage loans

In a March 8, 2024, blog article, the CFPB has signaled a shift of its "junk fees" campaign to residential real estate loans and their closing costs.

According to the article, in 2022, the median amount paid by borrowers for total loan costs (origination fees, appraisal and credit report fees, title insurance, discount points, and other fees) was nearly $6,000. Many of these costs are fixed and do not fluctuate with interest rates or change based on the size of the loan. As a result, they have an outsized impact on borrowers with smaller mortgages, such as lower income borrowers, first-time homebuyers, and borrowers living in Black and Hispanic communities. A 2021 Fannie Mae study found that nearly 15 percent of lower income homebuyers had closing costs that exceeded the amount of their down payment.

The article reports the Bureau is paying particular attention to the recent rise in discount points. A higher percentage of borrowers reported paying discount points in 2022 than any other years since this data point was first reported in 2018. In 2022 about 50.2 percent of home purchase borrowers paid some discount points, up from 32.1 in 2021. Borrowers are also paying more in discount points. The median discount points paid for home purchase loans in 2022 was $2,370 in 2022, up from $1,225 in 2021. Lenders sell discount points to borrowers to reduce interest rates.

The article also said it appears that some closing costs are high and increasing because there is little competition. Borrowers are required to pay for many of the costs associated with closing a home loan but cannot pick the provider and do not benefit from the service. In many cases, the lender simply picks from a very small universe of providers, and the costs are then passed on to the borrower, and cites lender;s title insurance as one example of a fee borrowers face at closing where the borrower has no control over cost. Fees for credit reports are another example cited in the article.

03/11/2024

Fed finalizes rule for financial market utilities

The Federal Reserve Board has announced it has approved a final rule that updates risk management requirements for certain systemically important financial market utilities (FMUs) supervised by the Board. FMUs provide essential infrastructure to clear and settle payments and other financial transactions to allow financial markets and the broader economy to function effectively.

The final updates provide additional clarity and specificity to existing requirements in four key areas of operational risk management: incident management and notification; business continuity management and planning; third-party risk management; and review and testing of operational risk management measures. For example, the updates explicitly require FMUs to establish an incident management framework and emphasize the need for FMUs to continue to advance their cyber resilience capabilities.

The final updates are substantively similar to the proposal and largely consistent with existing measures that FMUs take to comply with the current requirements.

FMUs subject to the rule must be in compliance with certain updates by 90 days and all updates by 180 days after publication in the Federal Register.

03/11/2024

Regulators to publish temporary exceptions to FIRREA appraisal requirement

The Federal Reserve Board, OCC, FDIC, and NCUA have jointly scheduled Federal Register publication tomorrow (March 12, 2024) of temporary exceptions to FIRREA appraisal requirements for real estate-related financial transactions, provided certain criteria are met, in an area in the State of Hawaii following the major disaster declared by President Biden as a result of wildfires. The expiration date for the exceptions is August 10, 2026, which is three years after the date the President declared the major disaster. The agencies' order will be effective on publication.

The agencies also have determined that the exceptions are consistent with safety and soundness, provided that the depository institution determines the following: (1) the transaction involves real property located in the area designated [Maui County] as adversely affected by the major disaster; (2) there is a binding commitment to fund the transaction that was entered into on or after August 10, 2023, but no later than August 10, 2026; and (3) the value of the real property supports the institution’s decision to enter into the transaction. In addition, the transaction must continue to be subject to review by management and by the agencies in the course of examinations of the institution.

03/08/2024

FTC issues extends telemarketing fraud protections to businesses

The Federal Trade Commission has announced a final rule extending telemarketing fraud protections to businesses and updating the rule’s recordkeeping requirements in light of developments in technology and the marketplace. The Commission also announced a proposed rule that would provide the agency with significant new tools to combat tech support scams.

The final rule will be effective 30 days after publication in the Federal Register with compliance with one provision delayed until 180 days after publication.

There will be a 60-day comment period on the proposed rule following its Federal Register publication.

03/08/2024

Trade groups sue CFPB to stop credit card late fees rule

The U.S. Chamber of Commerce announced it has filed a lawsuit in the U.S. District Court for the Northern District of Texas, Fort Worth Division seeking a preliminary injunction to stop the Consumer Financial Protection Bureau (CFPB) from implementing its rule to limit credit card late fees, arguing that the CFPB not only exceeded its statutory authority but did so by relying on the use of secret data collected for an unrelated purpose.

The Chamber and co-plaintiffs Fort Worth Chamber of Commerce, Longview Chamber of Commerce, American Bankers Association, Consumer Bankers Association, and Texas Association of Business, allege that the CFPB—

  • Violated the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) by preventing issuers from collecting reasonable and proportional late fees when cardholders do not pay their bills on time;
  • Violated the Administrative Procedures Act (APA) by promulgating a final rule that is arbitrary and capricious, relying on secret data collected from only the largest banks for a different purpose and by a different agency; and
  • Issued the rulemaking with funds drawn in violation of the U.S. Constitution's Appropriations Clause.

The plaintiffs also filed a motion for a preliminary injunction that would bar the CFPB from enforcing, applying, or implementing the final rule, and a brief in support of that motion.

03/07/2024

SEC adopts rules to enhance and standardize climate-related disclosures

The Securities and Exchange Commission yesterday announced it has adopted rules to enhance and standardize climate-related disclosures by public companies and in public offerings. The final rules reflect the Commission’s efforts to respond to investors’ demand for more consistent, comparable, and reliable information about the financial effects of climate-related risks on a registrant’s operations and how it manages those risks while balancing concerns about mitigating the associated costs of the rules.

The adopting release is published on SEC.gov and will be published in the Federal Register. The final rules will become effective 60 days following publication of the adopting release in the Federal Register, and compliance dates for the rules will be phased in for all registrants, with the compliance date dependent on the registrant’s filer status.

03/07/2024

Foreign-based person must comply with U.S. sanctions and export controls

Yesterday, U.S. Department of Justice, the U.S. Department of Commerce, and the U.S. Department of the Treasury’s Office of Foreign Assets Control, issued a Tri-Seal Compliance Note: “Obligations of foreign-based persons to comply with U.S. sanctions and export control laws.”

03/07/2024

U.S. targets companies and vessels aiding Qods Force and Houthi shipments

The Treasury Department has reported that OFAC has taken additional action to target shipments of Iranian commodities undertaken by the network of Iran-based, Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF)-backed Houthi financial facilitator Sa’id al-Jamal. Yesterday’s action targets two Hong Kong- and Marshall Islands-based ship owners and two vessels for their role in shipping commodities on behalf of al-Jamal, and follows a February 27 action targeting a related vessel, the ARTURA.

For identification information on the companies and vessels, see BankersOnline's March 6, 2024, OFAC Update.

03/07/2024

Fed posts Beige Book for February 2024

The Federal Reserve Board has posted the February 2024 Beige Book, prepared at the Federal Reserve Bank of San Francisco based on information collected by the twelve Reserve Banks on or before February 26, 2024. This document summarizes comments received from contacts outside the Federal Reserve System and is not a commentary on the views of Federal Reserve officials.

03/06/2024

Another FDIC update to RMS Manual

The FDIC has announced another update of its Risk Management Manual of Examination Policies (RMS Manual). This update affects Section 15.1 (Formal Administrative Actions).

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