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Top Story Compliance Related

10/27/2021

OCC takes enforcement action against mortgage subservicer

The OCC on Tuesday announced it had issued a Consent Cease and Desist Order against Cenlar FSB (Ewing, NJ), the largest mortgage sub-servicer in the country, performing servicing duties on behalf of financial institution clients throughout the United States, and the second largest mortgage servicer in the United States.

The OCC's action was based on the bank’s failure to establish effective controls and risk management practices related to its mortgage servicing and subservicing activities. The order requires the bank to take comprehensive corrective actions to address identified deficiencies and implement internal controls and risk management practices that are appropriate to the bank’s risk profile and the size of its mortgage subservicing operations.

The order also limits excessive growth and prioritizes remediation by requiring the bank to receive no supervisory objection from the OCC before adding new subservicing clients and prior to declaring or paying dividends to shareholders while the order is effective.

10/27/2021

FTC warns businesses about deceptive money-making claims

The Federal Trade Commission has announced that this week, the Commission put more than 1,100 businesses that pitch money-making ventures on notice that if they deceive or mislead consumers about potential earnings, the FTC won’t hesitate to use its authority to target them with large civil penalties.

The FTC is deploying its Penalty Offense Authority to remind businesses of the law and deter them from breaking it. By sending a Notice of Penalty Offenses to the companies, the agency is placing them on notice they could incur significant civil penalties—up to $43,792 per violation—if they or their representatives make claims about money-making opportunities that run counter to prior FTC administrative cases. The Notice of Penalty Offenses allows the agency to seek civil penalties against a company that engages in conduct that it knows is unlawful, and that has been found unlawful in a previous FTC administrative order, other than a consent order.

Companies receiving the Notice also received a copy of the recently issued Notice of Penalty Offenses concerning endorsements and testimonials [see "FTC warns advertisers: honest opinions only"], as companies frequently use testimonials to advertise money-making opportunities. Together, the notices make clear that it is illegal to use testimonials to mislead consumers about the rewards of participating in a money-making opportunity.

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10/27/2021

OCC FAQs on proposal to rescind CRA rule

With Bulletin 2021-50, issued yesterday, the Office of the Comptroller of the Currency has issued responses to frequently asked questions about a notice of proposed rulemaking soliciting comments on the proposal to rescind the OCC’s Community Reinvestment Act (CRA) rule issued on June 5, 2020. The notice, which was published in the Federal Register on September 17, 2021, proposes that the June 2020 CRA rule largely be replaced with the rules adopted jointly by the OCC, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation in 1995, as revised.

The FAQs provide information on the rulemaking process and the OCC’s consideration of potential CRA transition issues, including:

  • the impact of the proposed rule on CRA bank type.
  • qualifying activities and the qualifying activity confirmation request system.
  • the transition period.
  • examination administration.
  • assessment areas.
  • targeted geographic areas.
  • strategic plans.
  • public comments.

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10/27/2021

Treasury sanctions Libyan national

The Treasury Department on Tuesday announced that OFAC, acting in coordination with an action by the United Nations Security Council, sanctioned Libyan national Osama Al Kuni Ibrahim (Al Kuni), who is responsible for serious human rights abuse against migrants in Libya. Al Kuni is designated pursuant to Executive Order 13726 for being involved in, or having been involved in, the targeting of civilians through the commission of acts of violence, abduction, forced displacement, or attacks on schools, hospitals, religious sites, or locations where civilians are seeking refuge, or through conduct that would constitute a serious abuse or violation of human rights or a violation of international humanitarian law.

As a result of yesterday’s action, all property and interests in property of the designated individual that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.

Al Kuni was designated by the UN Security Council’s Libya Sanctions Committee. Pursuant to that designation, all UN Member States are obligated to impose an asset freeze and travel ban.

For more information on Al Kuni, see the BankersOnline October 26, 2021, OFAC Update.

10/27/2021

FATF lists jurisdictions with AML/CTF/CPF deficiencies

FinCEN has issued a press release to inform U.S. financial institutions that the Financial Action Task Force (FATF), an intergovernmental body that establishes international standards to combat money laundering, counter the financing of terrorism, and combat weapons of mass destruction proliferation financing (AML/CFT/CPF), has issued public statements updating its lists of jurisdictions with strategic AML/CFT/CPF deficiencies following its plenary meeting this month. U.S. financial institutions should consider the FATF’s stance toward these jurisdictions when reviewing their obligations and risk-based policies, procedures, and practices.

On October 21, 2021, the FATF added Jordan, Mali, and Turkey to its list of the Jurisdictions under Increased Monitoring and removed Botswana and Mauritius.

The FATF’s list of High-Risk Jurisdictions Subject to a Call for Action remains the same with Iran and the Democratic People’s Republic of Korea still subject to the FATF’s countermeasures.

FATF issued two statements:

  1. Jurisdictions under Increased Monitoring, which publicly identifies jurisdictions with strategic deficiencies in their AML/CFT/CPF regimes that have committed to, or are actively working with, the FATF to address those deficiencies in accordance with an agreed upon timeline
  2. High-Risk Jurisdictions Subject to a Call for Action, which publicly identifies jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes and calls on all FATF members to apply enhanced due diligence, and, in the most serious cases, apply counter-measures to protect the international financial system from the money laundering, terrorist financing, and proliferation financing risks emanating from the identified countries.

10/26/2021

FTC restores practice of restricting anticompetitive mergers

The Federal Trade Commission has announced that it is restoring its long-established practice of routinely restricting future acquisitions for merging parties that pursue anticompetitive mergers.

The Prior Approval Statement issued yesterday puts industry on notice that the FTC’s merger enforcement orders will once again require acquisitive firms to obtain prior approval from the agency before closing any future transaction affecting each relevant market for which a violation was alleged, for a minimum of ten years.

In July 2021, the Commission rescinded a 1995 policy statement that for decades had fueled consolidation by preventing the agency from imposing these merger restrictions. The application of the Prior Approval Policy Statement will protect consumers and deter merging parties from pursuing anticompetitive deals. The consequences of attempting an anticompetitive deal will be more severe and the bar for consummating further anticompetitive acquisitions will be higher.

Parties settling an anticompetitive deal with a consent order will need the Commission’s permission to close any further acquisition in an affected market, and sometimes in broader markets depending on the circumstances, for at least ten years. The FTC will weigh a number of factors in determining the scope of a prior approval provision, including the nature of the transaction, the level of market concentration and degree to which the transaction increases market concentration, the degree of pre-merger market power, the parties’ history of acquisitiveness, and evidence of anticompetitive market dynamics. The Commission may also seek prior approvals even when parties abandon a transaction.

10/26/2021

First Treasury counselor for racial equity appointed

Treasury Secretary Yellen has announced the appointment of Janis Bowdler to serve as the Department’s first Counselor for Racial Equity. Ms. Bowdler will be charged with coordinating Treasury’s efforts to advance racial equity including engaging with diverse communities throughout the country and to identify and mitigate barriers to accessing benefits and opportunities with the Department. In announcing the appointment, Secretary Yellen said, “The American economy has historically not worked fairly for communities of color. The pandemic threw a spotlight on this inequity; people of color were often the first to lose their jobs and businesses. Treasury must play a central role in ensuring that as our economy recovers from the pandemic, it recovers in a way that addresses the inequalities that existed long before anyone was infected with COVID-19.”

10/26/2021

Arizona housing providers settle discrimination claims

HUD has announced that it has reached a Conciliation and Voluntary Compliance Agreement with MGM Investment Company, the owner of Roosevelt Plaza Apartments in Phoenix, Arizona, as well as its property manager, resolving allegations that they violated the Fair Housing Act and Title VI of the Civil Rights Act of 1964 when they failed to provide adequate language services for a resident with limited English proficiency (LEP). Roosevelt Plaza Apartments is a recipient of HUD funding.

10/26/2021

Chopra speaks out on 'digital redlining'

At the joint Justice Department, OCC, and CFPB news conference on the Trustmark National Bank enforcement action on Friday, CFPB Director Rohit Chopra said that the Bureau will be watching for "digital redlining, disguised through so-called neutral algorithms, that may reinforce the biases that have long existed." He continued, "Technology companies and financial institutions are amassing massive amounts of data and using it to make more and more decisions about our lives, including loan underwriting and advertising. While machines crunching numbers might seem capable of taking human bias out of the equation, that’s not what is happening....When consumers and regulators do not know how decisions are made by the algorithms, consumers are unable to participate in a fair and competitive market free from bias. Algorithms can help remove bias, but black box underwriting algorithms are not creating a more equal playing field and only exacerbate the biases fed into them."

Chopra added, "Given what we have seen in other contexts, the speed with which banks and lenders are turning lending and advertising decisions over to algorithms is concerning. Too many families were victimized by the robo-signing scandals from the last crisis, and we must not allow robo-discrimination to proliferate in a new crisis.

"We should never assume that algorithms will be free of bias. If we want to move toward a society where each of us has equal opportunities, we need to investigate whether discriminatory black box models are undermining that goal."

10/26/2021

Justice announces new initiative to combat redlining

The Department of Justice announced the launch on Friday of the department’s new Combatting Redlining Initiative. Redlining is an illegal practice in which lenders avoid providing services to individuals living in communities because of the race or national origin of the people who live in those communities. The new Initiative represents the department’s most aggressive and coordinated enforcement effort to address redlining, which is prohibited by the Fair Housing Act and the Equal Credit Opportunity Act.

This Initiative, which will be led by the Civil Rights Division’s Housing and Civil Enforcement Section in partnership with U.S. Attorney’s Offices, will build on the longstanding work by the division that seeks to make mortgage credit and homeownership accessible to all Americans on the same terms, regardless of race or national origin and regardless of the neighborhood where they live. The Initiative will:

  • Utilize U.S. Attorneys’ Offices as force multipliers to ensure that fair lending enforcement is informed by local expertise on housing markets and the credit needs of local communities of color.
  • Expand the department’s analyses of potential redlining to both depository and non-depository institutions. Non-depository lenders are not traditional banks and do not provide typical banking services, but engage in mortgage lending and now make the majority of mortgages in this country.
  • Strengthen DOJ's partnership with financial regulatory agencies to ensure the identification and referrals of fair lending violations to the Department of Justice.
  • Increase coordination with State Attorneys General on potential fair lending violations.

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