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Top Story Compliance Related

05/20/2022

FDIC sets process for MDI applications

The FDIC has issued FIL-24-2022 to announce a process for an insured institution or applicant for deposit insurance to make a request that the FDIC recognize the institution as a minority depository institution. The process conforms to the FDIC's June 15, 2021, Statement of Policy Regarding Minority Depository Institutions,

  • FDIC supervised institutions or applicants for deposit insurance that seek to be recognized as an MDI may submit a written request, signed by a duly authorized officer or representative of the institution or applicant, at any time to the appropriate regional office.
    • Institutions may also submit a request in connection with a merger application or a change in control notice.
    • The request should contain sufficient information in support of the designation.
  • If the submitted documentation indicates that the institution or applicant has met the eligibility requirements, the FDIC will send a letter acknowledging recognition of the institution as an MDI.
    • The letter will describe the resources available through the MDI Program.
    • The institution or applicant should maintain documentation supporting its continued eligibility for the MDI designation.

05/20/2022

CFPB: states can enforce federal consumer protection laws

The Consumer Financial Protection Bureau yesterday announced it has issued an interpretive rule that describes states’ authorities to pursue lawbreaking companies and individuals that violate the provisions of federal consumer financial protection law. Because of the crucial role states play in protecting consumers, the Consumer Financial Protection Act (part of the Dodd-Frank Act of 2010) grants their consumer protection enforcers the authority to protect their citizens and otherwise pursue lawbreakers. The interpretive rule affirms:

  • States can enforce the Consumer Financial Protection Act, including the provision making it unlawful for covered persons or service providers to violate any provision of federal consumer financial protection law. This provision covers the Consumer Financial Protection Act itself as well as its 18 enumerated consumer laws and certain other laws, along with any rule or order prescribed by the CFPB under the Consumer Financial Protection Act, an enumerated consumer law, or pursuant to certain other authorities.
  • States can pursue claims and actions against a broad range of entities. The Consumer Financial Protection Act outlines entities over which the CFPB may exercise its enforcement authority under the statute. States are able to bring actions against a broader cross-section of companies and individuals.
  • CFPB enforcement actions do not put a halt to state actions. Sometimes states bring enforcement actions in coordination with the CFPB. A state may also bring an enforcement action to stop or remediate harm that is not addressed by a CFPB enforcement action against the same entity. Nothing in the Consumer Financial Protection Act precludes these complementary enforcement activities that serve to protect consumers at both the national and state levels.

The interpretive rule will become effective upon publication in the Federal Register.

05/20/2022

OCC enforcement actions

The OCC has released a list of enforcement actions taken by the agency in the month of April. Included was a consent order to cease and desist and pay a $30,000 civil money penalty issued to the president and CEO of a Beauregard, Louisiana, federal savings bank.

05/20/2022

Targeting Hizballah's abuse of the business sector

On Thursday, Treasury announced that OFAC had designated Ahmad Jalal Reda Abdallah, a Lebanese businessman and Hizballah financial facilitator, as well as five of his associates and eight of his companies in Lebanon and Iraq. The action was taken to counter Hizballah’s modus operandi of using the cover of seemingly legitimate businesses to generate revenue and leverage commercial investments across a multitude of sectors to secretly fund Hizballah and its terrorist activities. It also demonstrates how Hizballah goes to great lengths to establish companies with opaque ownership structure in order to conceal their involvement in these businesses, and also their involvement in criminal activities such as altering of medication labels for black market pharmaceutical sales.

For a complete list of the individuals and entities designated yesterday, see the May 19, 2022, BankersOnline OFAC Update.

05/19/2022

FDIC guide on simplified coverage rules

The FDIC has issued FIL-23-2022 to announce the addition of a Small Entity Compliance Guide to its website to assist insured depository institutions and community banking organizations in understanding and preparing for the changes in deposit insurance coverage made by its January 28, 2022, final rule amending the deposit insurance regulations for trust accounts and mortgage servicing accounts. The rule becomes effective April 1, 2024.

05/18/2022

SEC issues charges in multibillion dollar securities fraud

The Securities and Exchange Commission yesterday announced charges against Allianz Global Investors U.S. LLC (AGI US) and three former senior portfolio managers with a massive fraudulent scheme that concealed the immense downside risks of a complex options trading strategy they called “Structured Alpha.”

AGI US marketed and sold the strategy to approximately 114 institutional investors, including pension funds for teachers, clergy, bus drivers, engineers, and other individuals. After the COVID-19 market crash of March 2020 exposed the fraudulent scheme, the strategy lost billions of dollars as a result of AGI US and the portfolio managers’ misconduct.

AGI US has agreed to pay billions of dollars as part of an integrated, global resolution, including more than $1 billion to settle SEC charges and together with its parent, Allianz SE, over $5 billion in restitution to victims.

The SEC’s complaint, filed in the federal district court in Manhattan, alleges that Structured Alpha’s Lead Portfolio Manager, Gregoire P. Tournant, orchestrated the multi-year scheme to mislead investors who invested approximately $11 billion in Structured Alpha, and paid the defendants over $550 million in fees. It further alleges that, with assistance from Co-Lead Portfolio Manager Trevor L. Taylor and Portfolio Manager Stephen G. Bond-Nelson, Tournant manipulated numerous financial reports and other information provided to investors to conceal the magnitude of Structured Alpha’s true risk and the funds’ actual performance.

05/18/2022

FDIC adopts appeals guidelines

The FDIC has issued FIL-22-2022 to announce its Board has adopted Guidelines for Appeals of Material Supervisory Determinations that restore the Supervision Appeals Review Committee (SARC) as the final level of review in the agency’s supervisory appeals process. The revised Guidelines take effect May 17, 2022. The FDIC is soliciting comment on the revised Guidelines with a comment period of 30 days.

  • Under the revised Guidelines, the SARC generally replaces the Office of Supervisory Appeals as the final level of review in the FDIC’s supervisory appeals process.
  • Consistent with the composition of the SARC as it stood in 2021, the SARC will include: one inside member of the FDIC’s Board of Directors (serving as Chairperson); a deputy or special assistant to each of the other inside Board members; and the General Counsel as a non-voting member.
  • Aside from the substitution of the SARC as the final level of review, most aspects of the supervisory appeals process remain unchanged.
  • The revised Guidelines continue to encourage institutions to make good-faith efforts to resolve disputes with on-site examiners and/or the appropriate Regional Office. The Guidelines also continue to provide for review by the appropriate Division Director before submission of an appeal to the SARC.
  • The revised Guidelines expressly permit electronic submission of appeals and provide e-mail addresses that institutions may use to submit a request for review to the appropriate Division Director or an appeal to the SARC.

05/18/2022

CFPB issues circular supporting FDIC's rule

The CFPB announced on Tuesday it has issued Consumer Financial Protection Circular 2022-02, "Deceptive representations involving the FDIC's name or logo or deposit insurance" to address the question of when representations involving the name or logo of the Federal Deposit Insurance Corporation (FDIC) or about deposit insurance constitute a deceptive act or practice in violation of the Consumer Financial Protection Act (CFPA).

The Bureau's guidance is that "Covered persons or service providers likely violate the CFPA’s prohibition on deception if they misuse the name or logo of the FDIC or engage in false advertising or make misrepresentations to consumers about deposit insurance, regardless of whether such conduct (including the misrepresentation of insured status) is engaged in knowingly. Representations about deposit insurance may be particularly relevant with respect to new financial products or services, especially those involving new technologies such as digital assets, including crypto-assets."

05/18/2022

FDIC final rule on advertising and misuse of FDIC name or logo

On Tuesday, the FDIC its approval of a final rule implementing its statutory authority to prohibit any person or organization from making misrepresentations about FDIC deposit insurance or misusing the FDIC’s name or logo.

In recent years, the FDIC has observed an increasing number of instances where individuals or entities have misused the FDIC’s name or logo, or have made false or misleading representations about deposit insurance. To provide transparency into how the FDIC will address these and similar concerns, the final rule clarifies the FDIC’s procedures for identifying, investigating, and where necessary, taking formal and informal enforcement actions against individuals or entities to address violations.

The rule, which will amend the FDIC's regulation on Advertisement of Membership at 12 CFR Part 328, will take effect 30 days after its publication in the Federal Register.


SAVE THE DATE! BankersOnline's John Burnett will present a special one-hour webinar on the FDIC's revised "Advertisement of Membership, False Advertising, Misrepresentation of Insured Status, and Misuse of the FDIC's Name or Logo" regulation on June 29, 2022, at 2:30 p.m. EDT.


05/17/2022

CFPB wants consistent enforcement of consumer financial protections

CFPB Director Rohit Chopra yesterday posted a CFPB Blog article to announce a new system for promoting consistent enforcement of consumer financial protections. The CFPB will issue Consumer Financial Protection Circulars to the broad set of government agencies responsible for enforcing federal consumer financial law, with guidance on how the CFPB intends to enforce federal consumer financial law.

The enforcers of federal consumer financial law include, most notably, state attorneys general and state regulators, as well as federal financial regulators such as the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the National Credit Union Administration. Some federal consumer financial laws are also enforceable by other federal agencies, including the Department of Justice, the Federal Trade Commission, the Farm Credit Administration, the Department of Transportation, and the Department of Agriculture. In addition, some of these laws provide for private enforcement.

The CFPB will also release Consumer Financial Protection Circulars publicly to increase transparency for the benefit of the public and regulated entities.

Circular 2022-01, issued yesterday, describes the circulars as policy statements under the Administrative Procedures Act that will provide background information about applicable law, articulate considerations relevant to the CFPB's exercise of its authorities, and advise other parties with authority to enforce federal consumer financial law. The Director of the CFPB will authorize issuance of each Consumer Financial Protection Circular, and the CFPB will publish them on its website and in the Federal Register.

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