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10/26/2020

FATF strengthens standards against proliferation financing

Treasury reports that the Financial Action Task Force (FATF) concluded its 32nd plenary meeting on Friday, October 23, by agreeing to revise its standards to further strengthen the global response to the financing of proliferation related to weapons of mass destruction. The endorsement of the new standard is a result of an initiative that began under the U.S. FATF presidency and was adopted by finance ministers of FATF members in 2019.

The FATF also continued its focus on the impact of the COVID-19 pandemic on detecting and countering fraud including attempts to defraud government-backed stimulus programs. The task force also adopted an updated report on trade-based money laundering and recognized progress by a number of jurisdictions in rectifying their AML/CFT deficiencies.

10/26/2020

Russian government research institute sanctioned

On Friday, the Department of the Treasury announced that OFAC had designated, in accordance with Section 224 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), a Russian government research institution—State Research Center of the Russian Federation FGUP Central Scientific Research Institute of Chemistry and Mechanics (TsNIIKhM)—that is connected to the destructive Triton malware. The Triton malware—known also as TRISIS and HatMan in open source reporting—was designed specifically to target and manipulate industrial safety systems, which provide for the safe emergency shutdown of industrial processes at critical infrastructure facilities in order to protect lives.

For detailed identification information on TsNIIKhM, see this BankersOnline OFAC Update.

10/26/2020

Agencies propose lower recordkeeping and travel rule threshold

The Financial Crimes Enforcement Network (FinCEN) and the Federal Reserve Board have invited comment on a proposed rule that would amend the recordkeeping and travel rule regulations under the Bank Secrecy Act.

FinCEN and the Board, under their shared authority, are proposing amendments to the recordkeeping rule jointly, while FinCEN is proposing amendments to the travel rule. Under the current recordkeeping and travel rule regulations, financial institutions must collect, retain, and transmit certain information related to funds transfers and transmittals of funds over $3,000. The proposed rule lowers the applicable threshold from $3,000 to $250 for international transactions. The threshold for domestic transactions remains unchanged at $3,000.

The proposed rule further clarifies that those regulations apply to transactions above the applicable threshold involving convertible virtual currencies, as well as transactions involving digital assets with legal tender status, by clarifying the meaning of "money" as used in certain defined terms.

Comments on the proposal will be accepted for 30 days following publication in the Federal Register.

10/23/2020

CFPB ANPR on consumer access to financial records

The CFPB announced yesterday an advance notice of proposed rulemaking (ANPR) requesting information related to consumer access to financial records.

The CFPB is asking the public how it might most efficiently and effectively develop regulations to implement Section 1033 of the Dodd-Frank Act, which provides for consumer rights to access financial records. When consumers use financial products and services, the providers of those products and services generally accumulate data about those consumers and their use of those products and services. Consumer access to these data allow consumers to manage their financial accounts and can enhance consumers’ control of their financial matters.

Consumers may realize these benefits by authorizing third parties to access these data on their behalf and allowing those third parties to deliver new or improved financial products and services. Use cases for consumer-authorized data include personal financial management, making and receiving payments, assisting consumers with improving savings outcomes, underwriting credit, and many other services.

While consumer access to financial records can enable the development of innovative and beneficial consumer financial products, it can also present consumer risks. The Bureau’s ANPR seeks comments and information on costs and benefits of consumer data access; competitive incentives; standard-setting; access scope; consumer control and privacy; and data security and accuracy.

Comments on the ANPR will be accepted for 90 days following its publication in the Federal Register.

10/23/2020

High ranking Hizballah officials and entities designated

OFAC has announced counter terrorism designations, Iran-related designations and updates, foreign interference in U.S. election designations, and a Syria designation update.

  • Two members of Hizballah’s Central Council—Nabil Qaouk and Hassan al-Baghdadi. The Central Council is responsible for identifying and electing the group’s highest decision-making body, the Shura Council, which formulates policy and asserts control over all aspects of Hizballah’s activities, including its military activities.
  • Iraj Masjedi, a general in Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and Iran’s Ambassador to Iraq.
  • Five Iranian entities for attempting to influence elections in the United States

The full SDN listings of each of the individuals and entities designated can be found in this BankersOnline OFAC Update.

10/23/2020

Goldman Sachs fined $2.9B

The Federal Reserve Board has announced it has issued an order to cease and desist and for assessment of a civil money penalty of $154 million against Goldman Sachs Group, Inc., for the firm's failure to maintain appropriate oversight, internal controls, and risk management with respect to Goldman's involvement in a far-reaching scheme to defraud a Malaysian state-owned investment and development company, 1Malaysia Development Berhad (1MDB).

In 2012 and 2013, Goldman arranged and underwrote three bond offerings that raised $6.5 billion for 1MDB. Certain former Goldman bankers in Asia participated in a scheme with Malaysian businessman Low Taek Jho and others to divert substantial portions of the proceeds from the 1MDB offerings for their personal benefit and to pay bribes to certain foreign government officials. Goldman's transaction approval processes and internal controls failed to detect or prevent the scheme or to address obvious red flags around the 1MDB offerings.

The Board is requiring Goldman to improve its risk management and oversight of significant and complex transactions, enhance its due diligence related to these transactions, and improve its anti-bribery compliance program. The Board's action is being taken in conjunction with actions by other authorities including the U.S. Department of Justice, the Securities and Exchange Commission, the New York Department of Financial Services, the U.K. Financial Conduct Authority, and the Bank of England Prudential Regulation Authority, and other foreign authorities. The penalties and disgorgement announced by all of the agencies total approximately $2.9 billion.

10/22/2020

CFPB extends the 'GSE Patch'

The Consumer Financial Protection Bureau has issued a final rule to extend the Government-Sponsored Enterprise (GSE) Patch until the (yet to be established) mandatory compliance date of a final rule amending the General Qualified Mortgage (QM) loan definition in Regulation Z. The GSE Patch was scheduled to expire on January 10, 2021. The Bureau is not amending the provision in Regulation Z stating that the GSE Patch will expire if the GSEs (Fannie Mae and Freddie Mac) exit conservatorship.

The GSE Patch provides QM status to certain mortgage loans eligible for purchase or guarantee by either of the GSEs. GSE Patch loans are eligible for QM status even if the borrower's debt-to-income ratio exceeds 43 percent. The rule extending the GSE Patch will be effective 60 days after it is published in the Federal Register.

PUBLICATION AND EFFECTIVE DATE UPDATE: This final rule was published at 85 FR 67938 on October 26, 2020. It will become effective December 28, 2020.

10/22/2020

Social media scams increase

The Federal Trade Commission has released data revealing there has been a surge in reports from people who say they lost money to a scam that started on social media, including a spike of such complaints in the spring at the height of the COVID-19 pandemic. The data shows that the number of complaints about scams that started on social media more than tripled in the last year. People reported losing more than $117 million to this type of scam in just the first six months of 2020 compared to $134 million for all of 2019.

Online shopping topped the list of complaints from consumers who reported a scam to the FTC that originated on social media. Of these consumers, many were responding to an ad they saw on social media and reported that the item they ordered never arrived. Most of those consumers (94 percent) who identified the social media service in their complaint cited Facebook or Instagram as the platform they used.

Other top consumer complaints about social media scams related to romance scams or economic relief or income opportunities, which often target people who have lost a job or other income because of the pandemic. About half of all romance scam reports to the FTC since 2019 involve social media, usually on Facebook or Instagram.

10/22/2020

October 2020 Beige Book

The Federal Reserve Board has released the October 21, 2020 issue of the Beige Book.

Economic activity continued to increase across all Districts, with the pace of growth characterized as slight to modest in most Districts. Changes in activity varied greatly by sector. Manufacturing activity generally increased at a moderate pace. Residential housing markets continued to experience steady demand for new and existing homes, with activity constrained by low inventories. Banking contacts also cited increased demand for mortgages as the key driver of overall loan demand. Conversely, commercial real estate conditions continued to deteriorate in many Districts, with the exception being warehouse and industrial space where construction and leasing activity remained steady. Consumer spending growth remained positive, but some Districts reported a leveling off of retail sales and a slight uptick in tourism activity. Demand for autos remained steady, but low inventories have constrained sales to varying degrees. Reports on agriculture conditions were mixed, as some Districts are experiencing drought conditions. Districts characterized the outlooks of contacts as generally optimistic or positive, but with a considerable degree of uncertainty. Restaurateurs in many Districts expressed concern that cooler weather would slow sales, as they have relied on outdoor dining. Banking contacts in many Districts expressed concern that delinquency rates may rise in coming months, citing various reasons; however, delinquency rates have remained stable.

10/22/2020

Automated underwriting system for mortgages launched

The Federal Housing Administration has announced the launch of its new automated underwriting system (AUS) for use by lenders originating mortgages for FHA insurance. Built on the FHA Catalyst technology platform, the new FHA Catalyst: Single Family Origination Module - AUS allows lenders to electronically submit loan application data for single family forward mortgages from their loan origination systems directly to the module and receive mortgage insurance eligibility scoring decisions generated from FHA’s TOTAL Mortgage Scorecard. The new AUS accepts the Mortgage Industry Standards Maintenance Organization (MISMO) 3.4 dataset used in the new, industry-wide Uniform Residential Loan Application. Other features include:

  • Detailed feedback certificates that provide specific and actionable information for lenders that corresponds with FHA policies in the Single Family Housing Policy Handbook 4000.1;
  • Integrated submission of credit report data reissuances, which eliminates the need for lenders to use a third-party routing system; and
  • Enhanced data synchronization between loan origination systems and FHA Catalyst through state-of-the-art Application Programming Interface (API) technology.

The AUS will be available in FHA Catalyst for single family forward mortgage programs on or after October 30, 2020.

10/21/2020

Agencies' rule to reduce impact of large bank failures

The federal bank regulatory agencies—The OCC, Federal Reserve Board, and FDIC—have finalized a rule to limit the interconnectedness and reduce the impact from failure of the largest banking organizations. The final rule is substantially similar to the proposal announced last year and complements other measures that the agencies have taken to limit interconnectedness among the largest banking organizations.

U.S. global systemically important bank holding companies, or GSIBs, as well as U.S. intermediate holding companies of foreign GSIBs, are required to issue debt with certain features under the Federal Reserve Board’s “total loss-absorbing capacity,” or TLAC, rule. That debt could be used to recapitalize the holding company during bankruptcy or resolution if it were to fail.

To discourage the largest banking organizations from purchasing TLAC debt, the final rule prescribes a more stringent regulatory capital treatment for holdings of TLAC debt. The regulatory capital treatment in the final rule will help to reduce the interconnectedness between the largest banking organizations and, if a GSIB were to fail, reduce the impact on the U.S. financial system from that failure.

This rulemaking, which becomes effective April 1, 2021, also includes a revision to the Federal Reserve Board’s TLAC requirements that will require GSIBs to report publicly their outstanding TLAC debt.

10/21/2020

FHA extends COVID-19 forbearance request time

The FHA has announced it is extending the date for single family homeowners with FHA-insured mortgages to request an initial forbearance from their mortgage servicer to forbear their mortgage payments for up to six months. Homeowners experiencing a financial hardship as a result of the COVID-19 pandemic may now request an initial forbearance through December 31, 2020 (the deadline was previously October 30). The FHA requires mortgage servicers to:

  • Offer homeowners with FHA-insured mortgages mortgage payment forbearance when the homeowner requests it, with the option to extend the forbearance for up to a year in total. FHA does not require a lump sum payment at the end of the forbearance period.
  • Assess homeowners who receive COVID-19 forbearance for FHA's special COVID-19 National Emergency Standalone Partial Claim before the end of the forbearance period. This program puts all suspended mortgage payment amounts owed into a junior lien, which is only repaid when the homeowner sells the home, refinances the mortgage, or the mortgage is otherwise extinguished.
  • Assess homeowners who are not eligible for the COVID-19 National Emergency Standalone Partial Claim for one of FHA’s COVID-19 expanded home retention solutions announced on July 8, 2020.

10/21/2020

FDIC approves temporary Part 363 amendment

The FDIC has issued an interim final rule to provide relief for insured depository institutions that have experienced large cash inflows resulting from participation in the Paycheck Protection Program, the Money Market Mutual Fund Liquidity Facility, and the Paycheck Protection Program Liquidity Facility, or due to other factors such as the effects of other government stimulus efforts, and, absent regulatory action, would be required to incur substantial costs on a temporary basis.

The rule will allow IDIs that have experienced growth to determine whether they are subject to the requirements of Part 363 of the FDIC’s regulations for fiscal years ending in 2021 based on the consolidated total assets as of December 31, 2019. Such IDIs, whose asset growth may be temporary but significant, would be otherwise required to develop processes and systems to comply with the annual independent audits and reporting requirements of Part 363 on a potentially short-term basis.

The rule is effective immediately and remains effective through December 31, 2021, unless extended by the FDIC. Comments on the rule will be accepted for 30 days after it is published in the Federal Register.

PUBLICATION UPDATE: This rule was published at 85 FR 67427 on October 23, 2020. The comment period will end on Monday, November 23, 2020.

10/21/2020

HUD awards $12.5M in housing counseling grants

HUD has announced it has awarded more than $12.5 million in supplemental housing counseling grants. These grants will support quality housing counseling services, including the foreclosure avoidance and rental counseling services used by many families as they work to recover from the COVID-19 pandemic. The grants awarded will directly support the housing counseling services provided by 219 HUD-approved local housing counseling agencies, national and regional organizations, and state housing finance agencies that competed under HUD’s FY 2020 Supplemental Comprehensive Housing Counseling Grant Notice of Funds Availability (NOFA) or HUD’s FY 2019/2020 Comprehensive Housing Counseling NOFA.

10/21/2020

Florida bank closed and purchased

The FDIC has reported that First City Bank of Florida, Fort Walton Beach, Florida, was closed Friday by the Florida Office of Financial Regulation, which appointed the FDIC as receiver. The failed bank experienced longstanding capital and asset quality issues, operating with financial difficulties dating back to 2009, which are not related to the current economic conditions resulting from the pandemic.

To protect depositors, the FDIC entered into a purchase and assumption agreement with United Fidelity Bank, fsb in Evansville, Indiana, to assume all of the deposits of First City Bank of Florida. As of June 30, 2020, First City Bank of Florida had approximately $134.7 million in total assets and $131.4 million in total deposits. In addition to assuming all of the deposits, United Fidelity Bank, fsb agreed to purchase essentially all of the failed bank’s assets.

The FDIC estimates that the cost to the Deposit Insurance Fund will be $10 million

10/21/2020

OFAC settlement with Berkshire Hathaway

OFAC has announced a $4,144,651 settlement with Berkshire Hathaway, Inc. (“Berkshire”), a multinational conglomerate holding company based in Omaha Nebraska, and its foreign subsidiary, Iscar Kesici Takim Ticareti ve Imalati Limited Sirket (“Iscar Turkey”).

Berkshire, on behalf of itself and its subsidiary located in Turkey, has agreed to settle its potential civil liability for 144 apparent violations of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR). Specifically, between December 2012 and January 2016, Iscar Turkey exported 144 shipments of cutting tools and related inserts, with a total value of $383,443, to two third-party Turkish distributors knowing that such goods would be shipped to a distributor in Iran for resale to Iranian end-users, including several entities later identified as meeting the definition of the Government of Iran, which would have been prohibited if engaged in by a U.S. person. These transactions appear to have violated § 560.215 of the ITSR. OFAC determined that Berkshire voluntarily self-disclosed the apparent violations on behalf of Iscar Turkey, and that the apparent violations constitute an egregious case.

According to OFAC's Enforcement Release, Iscar Turkey's action violated Berkshire's compliance policies, and Iscar Turkey took steps to obfuscate its dealings with Iran, including concealing these activities from Berkshire. The Apparent Violations occurred under the direction of certain Iscar Turkey senior managers despite Berkshire and other Berkshire subsidiaries’ repeated communications and policies sent to Iscar Turkey regarding U.S. sanctions against Iran and the application of the ITSR to Iscar Turkey’s operations. The General Manager and his employees took certain steps to conceal Iscar Turkey’s activities and plans with Iran such as: (1) utilizing private email addresses that bypassed the controls and visibility of the corporate email system to communicate about orders from Iranian customers; (2) utilizing false names in internal records of Iscar Turkey to conceal transactions; (3) providing false assurances in response to compliance inquiries; (4) providing fraudulent evidence of a compliance training session; and, (5) when the internal investigation was initiated, lying to interviewers and counseling others to lie.

Berkshire voluntarily self-disclosed the apparent violations to OFAC in May 2016 after receiving an anonymous tip in January 2016. Berkshire followed with multiple mitigating actions in cooperation with the OFAC investigation. Those mitigating actions helped reduce the base civil monetary penalty for the violations from $18.4 million to the settlement amount of $4,144,651.

10/20/2020

CFPB posts HMDA data reference chart for 2021

The CFPB has posted the "Reportable HMDA Data: A Regulatory and Reporting Overview Reference Chart for HMDA Data Collected in 2021," which can be used as a reference tool for data points required to be collected, recorded, and reported under Regulation C, as amended by the HMDA Rules. Relevant regulation and commentary sections are provided for ease of reference. The chart also incorporates the information found in Section 4.2.2 of the 2021 Filing Instructions Guide and provides when to report not applicable or exempt, including the codes used for reporting not applicable or exempt from section 4 of the 2021 Filing Instructions Guide for ease of reference.

10/20/2020

ACCESS initiative launched by NCUA

NCUA Chairman Hood has announced the launch of the agency’s new Advancing Communities through Credit, Education, Stability, and Support (ACCESS) initiative, which will bring together leaders across the NCUA to refresh and modernize regulations, policies, and programs in support of greater financial inclusion within the agency and the credit union system. Efforts under this program include increasing access to credit and loan products, dedicating resources to help people make smart financial decisions, enhancing existing programs that encourage credit union membership and access to financial services, and fostering inclusive policies and outreach efforts in the community.

10/20/2020

Owner of bitcoin 'mixer' service hit with $60M CMP

The Financial Crimes Enforcement Center has announced it has assessed a $60,000,000 civil money penalty against Larry Dean Harmon of Akron, Ohio, d/b/a Helix and primary operator of Coin Ninja LLC, , both convertible virtual currency "mixers" or "tumblers," for multiple violations of the Bank Secrecy Act and implementing regulations.

Harmon operated Helix from 2014 to 2017 and Coin Ninja from 2017 to 2020, as unregistered money services businesses, and is being prosecuted in federal court on charges of conspiracy to launder monetary instruments and operation of an unlicensed money transmitting business in connection with his operation of Helix.

Mr. Harmon, doing business as Helix and Coin Ninja, operated as an exchanger of convertible virtual currencies by accepting and transmitting bitcoin through a variety of means. From June 2014 through December 2017, Helix conducted over 1,225,000 transactions for its customers and was associated with virtual currency wallet addresses that sent or received over $311 million dollars. FinCEN’s investigation has identified at least 356,000 bitcoin transactions through Helix. Mr. Harmon operated Helix as a bitcoin mixer, or tumbler, and advertised its services in the darkest spaces of the internet as a way for customers to anonymously pay for things like drugs, guns, and child pornography. Mr. Harmon subsequently founded, and acted as Chief Executive Officer of, Coin Ninja, which operated as an unregistered MSB and in the same manner as Helix.

FinCEN's investigation demonstrated that Mr. Harmon deliberately disregarded his obligations under the BSA and implemented practices that allowed Helix to circumvent the BSA’s requirements. This included a failure to collect and verify customer names, addresses, and other identifiers on over 1.2 million transactions. Harmon, operating through Helix, actively deleted even the minimal customer information he did collect. The investigation revealed that Mr. Harmon engaged in transactions with narcotics traffickers, counterfeiters and fraudsters, as well as other criminals.

For additional information and a link to FinCEN's Order for Assessment of the Civil Money Penalty, see this BankersOnline penalty page.

10/20/2020

Fannie and Freddie extend COVID-19 loan flexibilities

The FHFA has announced that Fannie Mae and Freddie Mac will extend several of their loan origination flexibilities until the end of November, 2020. The changes are to ensure continued support for borrowers during the COVID-19 national emergency. The flexibilities were set to expire on October 31, 2020.

The extended flexibilities include:

  • Alternative appraisals on purchase and rate term refinance loans;
  • Alternative methods for documenting income and verifying employment before loan closing; and
  • Expanding the use of power of attorney to assist with loan closings.

10/20/2020

FHFA proposes rule for new Enterprise products and activities

The FHFA is seeking comments on a notice of proposed rulemaking that would require Fannie Mae and Freddie Mac (the Enterprises) to provide advance notice to FHFA of new activities and obtain prior approval before launching new products. The proposed rule would also establish revised criteria for determining whether a new activity requires notice to FHFA and for determining if that activity is a new product that merits public notice and comment. The proposed rule would replace the interim final rule that has been in effect since 2009.

The proposed rule’s requirements would also outline the process for FHFA review of a new activity and the timelines for approving a new product, including issuing a public notice and requesting public comment about a potential new product. Comments on the proposal will be accepted for 60 days following Federal Register publication.

10/20/2020

OFAC designates al-Qa’ida financial facilitator

On Monday, the Treasury Department announced that OFAC has designated Australia-based al-Qa’ida-associated facilitator Ahmed Luqman Talib for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Al-Qa’ida. Additionally, OFAC also designated one company, Talib and Sons, for being owned, controlled, or directed by Ahmed Luqman Talib.

For identification information on these and several other newly designated persons, see this BankersOnline OFAC Update.

10/19/2020

Industrial production declines

The Federal Reserve has released September G.17 Industrial Production and Capacity Utilization data. Industrial production fell 0.6 percent in September, its first decline after four consecutive months of gains. The index increased at an annual rate of 39.8 percent for the third quarter as a whole. Although production has recovered more than half of its February to April decline, the September reading was still 7.1 percent below its pre-pandemic February level.

Manufacturing output decreased 0.3 percent in September and was 6.4 percent below February's level. The output of utilities dropped 5.6 percent, as demand for air conditioning fell by more than usual in September. Mining production increased 1.7 percent in September; even so, it was 14.8 percent below a year earlier. At 101.5 percent of its 2012 average, total industrial production was 7.3 percent lower in September than it was a year earlier. Capacity utilization for the industrial sector decreased 0.5 percentage point in September to 71.5 percent, a rate that is 8.3 percentage points below its long-run (1972–2019) average but 7.3 percentage points above its low in April.

10/19/2020

Fed publishes its CRA ANPR

The Federal Reserve Board has published [85 FR 66410] in today's Federal Register its September 21 Advance Notice of Proposed Rulemaking [see our earlier Top Story] to solicit public input regarding modernizing the Board's Community Reinvestment Act regulatory and supervisory framework. The 120-day comment period will end February 16, 2021.

10/19/2020

FDIC names Rapid Prototyping Competition contestants

The FDIC has announced the selection of 14 technology companies to compete in the next phase of the agency’s Rapid Prototyping Competition, a tech sprint designed to develop an innovative new approach to financial reporting, particularly for community banks. The FDIC has awarded initial contracts to:

  1. Accenture Federal Services, LLC
  2. ACTUS Financial Research Foundation, Inc.
  3. Amberoon, Inc.
  4. Donnelley Financial, LLC
  5. DSQuorum, LLC (Data Society)
  6. Fed Reporter, Inc.
  7. Fidelity Information Services, LLC
  8. First Data Government Solutions, LP (Fiserv)
  9. Neocova Corporation
  10. Novantas, Inc.
  11. Palantir Technologies Inc.
  12. Synthetic P2P Holding Corporation (PeerIQ)
  13. S&P Global Market Intelligence, LLC
  14. TrueTandem, LLC

The objective of the Rapid Prototyping Competition is to develop technology for a timelier and less burdensome financial reporting process. Once completed, the system would better equip regulators to detect signs of risk and to take early actions designed to protect consumers, banks, the financial system and the economy.

10/16/2020

SEC publishes final rule on bank and S&L disclosures

The Securities and Exchange Commission has published [85 FR 66108] its final rule [see our earlier Top Story] updating the statistical disclosure requirements for banking registrants. The amendments update and expand the disclosures that registrants are required to provide, codify certain Guide 3 disclosure items and eliminate other Guide 3 disclosure items that overlap with Commission rules, U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), or International Financial Reporting Standards (“IFRS”). In addition, the amendments relocate the codified disclosure requirements to a new subpart of Regulation S-K and rescind Guide 3.

10/16/2020

Advisory on human trafficking and related activity

FinCEN has issued FIN-2020-A008, a Supplemental Advisory on Identifying and Reporting Human Trafficking and Related Activity. The Advisory supplements Advisory FIN-2014-A008, "Guidance on Recognizing Activity that May be Associated with Human Smuggling and Human Trafficking — Financial Red Flags."

The Supplemental Advisory explains four new human trafficking typologies identified since 2014, and provides a list of twenty behavioral and financial indicators to supplement the red flag indicators in the 2014 Advisory. Also included are two case studies illustrating the use of funnel accounts, prepaid cards and bitcoin; and instructions for SAR filing involving activities highlighted in the Advisory.

10/16/2020

New York bank pays $546,000 Flood Act penalty

The Federal Reserve Board has issued a consent order for a $546,000 civil money penalty to Manufacturers and Traders Trust Company, Buffalo, New York, for a pattern or practice of unspecified violations of Regulation H, 12 CFR § 208.25, which implements requirements of the National Flood Insurance Act.

10/16/2020

August G.20 report posted

The Federal Reserve Board has posted the August 2020 G.20 Finance Companies report .

10/16/2020

OCC enforcement orders

The OCC has issued a list of recent enforcement actions, which included several actions that had been separately and previously announced. Of the actions not previously announced—

10/15/2020

USAA Bank assessed $85M CMP

The OCC has assessed an $85 million civil money penalty against USAA Federal Savings Bank for the bank’s failure to implement and maintain an effective compliance risk management program and an effective information technology risk governance program. These deficiencies resulted in violations of law, including but not limited to violations of the Military Lending Act and the Servicemembers Civil Relief Act. In January 2019, the bank entered into a consent order with the OCC concerning the deficiencies, and is in the process of remediating them.

10/15/2020

FHA Catalyst available for multifamily lenders

The FHA has announced the availability of the first module of its FHA Catalyst technology platform for Multifamily lenders doing business with FHA. The module will allow eligible lenders to electronically submit applications for FHA insurance on multifamily properties. The new capability supports lenders in providing FHA-insured mortgage financing while working remotely because of the COVID-19 pandemic.

10/15/2020

FDIC asks early start on Call Report

The FDIC has issued FIL-97-2020 with links to materials pertaining to the Call Report for the quarter ending September 30, 2020. The agency asked that banks plan to complete their preparation, editing and review of their Call Report data as early as possible to ensure a timely submission of the data to the Central Data Repository.

With exceptions for certain institutions with foreign offices, completed Call Reports must be received by Friday, October 30, 2020.

10/15/2020

Fed proposes FOMC FOIA rules

The Federal Reserve Board is requesting public comment on technical, clarifying updates of the Federal Open Market Committee's Rules Regarding Availability of Information, which describe its Freedom of Information Act (FOIA) procedures. The proposal would implement non-substantive updates to the Committee's FOIA procedures to make them consistent with the Committee's current practices and to incorporate recent changes in law and guidance. The proposal also incorporates formatting and language from the Federal Reserve Board's revisions to its own FOIA procedures, which are effective October 15, 2020. Comments on the proposal are due by December 14, 2020.

10/15/2020

CFPB settles with debt collectors/buyers

The Consumer Financial Protection Bureau announced today it has filed a proposed stipulated final judgment and order to settle its lawsuit against Encore Capital Group, Inc., and its subsidiaries, Midland Funding, LLC; Midland Credit Management, Inc.; and Asset Acceptance Capital Corp. The companies, which are headquartered in San Diego, California, together form the largest debt collector and debt buyer in the United States.

Encore and its subsidiaries are currently subject to a 2015 consent order with the Bureau based on the Bureau’s previous findings that they violated the Consumer Financial Protection Act (CFPA), Fair Debt Collection Practices Act (FDCPA), and Fair Credit Reporting Act. The Bureau sued Encore and its subsidiaries on September 8 of this year, alleging that Encore and its subsidiaries violated the terms of this consent order and again violated the FDCPA and CFPA in their debt-collection practices.

If entered by the court, the stipulated final judgment and order will require Encore and its subsidiaries to pay $79,308.81 in redress to consumers and a $15 million civil money penalty. The settlement will also require Encore and its subsidiaries to make various material disclosures to consumers, refrain from the collection of time-barred debt absent certain disclosures to consumers, and abide by certain conduct provisions in the 2015 consent order for five more years.

10/14/2020

CFPB settles with Nissan Motor Acceptance Corp

The CFPB has announced it has issued a consent order against Nissan Motor Acceptance Corporation (NMAC), an auto financing subsidiary of Nissan North America, Inc., which services auto loans and leases originated by Nissan and Infiniti dealerships nationwide.

The Bureau found that NMAC and its agents:

  • wrongfully repossessed vehicles;
  • kept personal property in consumers’ repossessed vehicles until consumers paid a storage fee;
  • deprived consumers paying by phone of the ability to select payment options with significantly lower fees; and
  • in its loan extension agreements, made a deceptive statement that appeared to limit consumers’ bankruptcy protections.

These actions violated the Consumer Financial Protection Act’s (CFPA) prohibition against unfair and deceptive acts and practices.

The Bureau’s consent order requires Nissan to refund fees paid by consumers, credit any outstanding charges stemming from the repossession, and pay consumers redress for each day Nissan wrongfully held the car. Nissan must also pay a civil money penalty of $4 million. The consent order also requires Nissan to:

  • prohibit its repossession agents from charging personal property fees to consumers directly and from demanding fees as a condition of returning personal property;
  • correct its repossession practices and conduct a quarterly review to discover and remediate any future wrongful repossessions;
  • clearly disclose to consumers the fee for each method of making a payment by phone before consumers are asked which method they wish to use; and
  • stop using any language that creates the impression that consumers have surrendered their bankruptcy rights.

10/14/2020

New head of FinCEN Intelligence Division

FinCEN announced yesterday that Jimmy Kirby was selected as the new Associate Director to head FinCEN’s Intelligence Division. As Associate Director of the Intelligence Division, Kirby will oversee FinCEN’s collection, analysis, and dissemination of financial intelligence, and a Division whose mission is critical to protecting national security, safeguarding the economy, and protecting communities from harm.

Mr. Kirby previously served for nearly four-and-a-half years as FinCEN's Chief Counsel, where he managed all legal matters pertaining to FinCEN and served as principal legal advisor to the Director and senior leadership.

10/14/2020

Fed discount rate meetings minutes released

The Federal Reserve Board has released the minutes of its interest rate meetings from August 24 through September 16, 2020.

10/14/2020

Agenda for FDIC public Board meeting

The FDIC has posted the agenda for its 10:00 a.m. EDT October 20, 2020, Board of Directors meeting, which will be open to the public via live webcast.

Key summary agenda items include:

  • Final Rule on Branch Application Procedures
  • Notice of Proposed Rulemaking on Removal of Transferred OTS Regulations Regarding Subordinate Organizations (Part 390, Subpart O)
  • Notice of Proposed Rulemaking on Role of Supervisory Guidance

Key discussion agenda items include:

  • Final Rule on Regulatory Capital Treatment for Investments in Certain Unsecured Debt Instruments of Global Systemically Important U.S. Bank Holding Companies, Certain Intermediate Holding Companies, and Global Systemically Important Foreign Banking Organizations; Total-Loss Absorbing Capacity Requirements
  • Final Rule on Net Stable Funding Ratio: Liquidity Risk Measurement Standards and Disclosure Requirements
  • Interim Final Rule on Applicability of Annual Independent Audits and Reporting Requirements for Fiscal Years Ending in 2021

10/14/2020

FinCEN Advisory on unemployment insurance fraud

FinCEN has issued FIN-2020-A007, an "Advisory on Unemployment Insurance Fraud During the Coronavirus Disease 2019 (COVID-19) Pandemic." The advisory contains descriptions of COVID-19-related unemployment insurance (UI) fraud, associated red flag indicators, and information on how to report suspicious activity that may involve UI fraud. Representative types of such fraud include:

  • Fictitious employer-employee fraud: filers falsely claim they work for a legitimate company, or create a fictitious company and supply fictitious employee and wage records to apply for UI payments;
  • Employer-employee collusion fraud: the employee receives UI payments while the employer continues to pay the employee reduced, unreported wages;
  • Misrepresentation of income fraud: an individual returns to work and fails to report the income in order to continue receiving UI payments, or in an effort to receive higher UI payments, an applicant claims higher wages than he/she previously earned;
  • Insider fraud: state employees use credentials to inappropriately access or change UI claims, resulting in the approval of unqualified applications, improper payment amounts, or movement of UI funds to accounts that are not on the application; or
  • Identity-related fraud: filers submit applications for UI payments using stolen or fake identification information to perpetrate an account takeover.

FinCEN asks that SARs for possible UI fraud include the key term "“COVID19 UNEMPLOYMENT INSURANCE FRAUD FIN-2020-A007” in SAR field 2 (Filing Institution Note to FinCEN) and the narrative to indicate a connection between the suspicious activity being reported and the activities highlighted in the advisory. Filers should also select SAR field 34(z) (Fraud-other) as the suspicious activity type, and include certain other information detailed in the Advisory, if available, to assist law enforcement.

10/13/2020

FDIC issues FIL on Hurricane Sally relief

The FDIC has issued FIL-96-2020 announcing steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Florida affected by Hurricane Sally.

10/13/2020

$1.3B authorized for Florida disaster recovery

Secretary Carson announced Monday that HUD is making more than $1.3 billion in funding available to the state of Florida, which will immediately help Floridians recover from Hurricane Michael and assist the investment in large scale disaster mitigation projects through the Community Development Block Grant Mitigation and Disaster Relief programs.

10/13/2020

CIP exemption for premium finance loans

The OCC, Federal Reserve, FDIC, NCUA, and FinCEN have issued an order granting an exemption from the requirements of the customer identification program rules implementing section 326 of the USA PATRIOT Act for certain loans. The affected loans are those extended by banks. credit unions and their subsidiaries under the jurisdiction of the agencies to all customers (entities and individuals) to facilitate purchases of property and casualty insurance policies referred to as insurance premium finance lending or premium finance loans.

This order, which is dated October 5, 2020, supersedes an order issued September 27, 2018.

10/13/2020

OFAC sanctions Nicaraguan bank and officials

On Friday, Treasury announced that OFAC had designated Nicaraguan financial institution Cooperativa De Ahorro Y Credito Caja Rural Nacional RL, as well as Attorney General Ana Julia Guido De Romero and Secretary of the Presidency Paul Herbert Oquist Kelley, in an effort to target key financial operations and government officials that continue to undermine Nicaragua’s democracy. The action, taken pursuant to Executive Order 13851, “Blocking Property of Certain Persons Contributing to the Situation in Nicaragua,” targets corrupt financial operations and Ortega regime supporters.

Identifying information can be found in this BankersOnline OFAC Update.

10/09/2020

Morgan Stanley fined $60M

The OCC has announced it assessed a $60 million civil money penalty against Morgan Stanley Bank, N.A., and Morgan Stanley Private Bank, N.A. ("the banks").

The OCC took these actions based on the banks’ failure to exercise proper oversight of the 2016 decommissioning of two Wealth Management business data centers located in the U.S.
Among other things, the OCC found that the banks—

  • failed to effectively assess or address risks associated with decommissioning its hardware;
  • failed to adequately assess the risk of subcontracting the decommissioning work, including exercising adequate due diligence in selecting a vendor and monitoring its performance; and
  • failed to maintain appropriate inventory of customer data stored on the decommissioned hardware devices.

In 2019, the banks experienced similar vendor management control deficiencies in connection with decommissioning other network devices that also stored customer data.

The OCC found the noted deficiencies constitute unsafe or unsound practices and resulted in noncompliance with 12 CFR Part 30, Appendix B, “Interagency Guidelines Establishing Information Security Standards."

10/09/2020

Simpler forgiveness application for small PPP loans

Treasury has announced that the SBA has released a simpler loan forgiveness application and application instructions for Paycheck Protection Program loans of $50,000 or less, and issued an interim final rule on its simpler forgiveness process.

The SBA began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders for PPP borrowers on October 2, 2020.

10/09/2020

School-affiliated credit card decline continues

The CFPB yesterday issued its annual College Credit Card Agreements report to Congress, which covers agreements between credit card issuers and institutions of higher education, as well as certain organizations affiliated with such institutions. The report indicates that in 2019 the number of total agreements in effect, as well as the number of accounts open under the agreements, continues a general downward trend. Overall, between 2009 and 2019, the number of agreements in effect, year-end open accounts, and payments by issuers all declined by more than two-thirds. Agreements with alumni associations continue to represent the large majority of agreements, accounts, and payments by issuers.

10/09/2020

OCC authorizes Hurricane Delta closings

The OCC has issued a proclamation allowing national banks, federal savings associations, and federal branches and agencies of foreign banks to close offices affected by Hurricane Delta at their discretion.

10/09/2020

FCC proposes amendments to TCPA regulations

The Federal Communications Commission has published [85 FR 64091] in today's Federal Register a proposed rule to implement section 8 of the Pallone-Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act) and seeks comment on how to best implement it. As directed by the TRACED Act, the Commission seeks to ensure that any exemption the Commission has granted under the Telephone Consumer Protection Act (TCPA) for calls to residential lines or for calls to wireless numbers includes requirements with respect to the classes of parties that may make such calls; the classes of parties that may be called; and the number of such calls that may be made to a particular called party.

The Commission, to comply with the TRACED Act, seeks comment on the need to amend exemptions the Commission has previously carved out. Those exemptions are: (1) Non-commercial calls to a residence; (2) commercial calls to a residence that do not constitute telemarketing; (3) tax-exempt nonprofit organization calls to a residence; (4) Health Insurance Portability and Accountability Act of 1996 (HIPAA)-related calls to a residence; (5) package delivery-related calls to a wireless number; (6) financial institution calls to a wireless number; (7) healthcare-related calls to a wireless number; (8) inmate calling service calls to a wireless number; and (9) cellular carrier calls to their own subscribers.

Comments are due on or before October 26, 2020, and reply comments are due on or before November 3, 2020.

10/09/2020

U.S. sanctions 18 major Iranian banks

Yesterday, the Secretary of the Treasury, in consultation with the Secretary of State, identified the financial sector of the Iranian economy pursuant to section 1(a)(I) of Executive Order 13902, which authorizes Treasury to sanction any Iranian financial institution. Subsequently, OFAC sanctioned eighteen major Iranian banks. Sixteen Iranian banks were sanctioned for operating in Iran’s financial sector and one bank for being owned or controlled by a sanctioned Iranian bank. Additionally, this action includes the designation of an Iranian military-affiliated bank under Treasury’s counter-proliferation authority.

See BankersOnline's OFAC Update for identification of the banks sanctioned by these actions, information on a new Iran-related General License, and links to new Iran-related FAQs.

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