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Top Story Compliance Related


MLA database update

The Department of Defense has published [86 FR 73263] a Federal Register notice of a scheduled change to the Military Lending Act (MLA) Database. This update adds cadets and midshipmen attending Military Service Academies of the Armed Forces, who are covered borrowers under the MLA, to the population of covered borrowers identified in the MLA database, to correct an error in the database's original development.

The change will be effective February 1, 2022.


OFAC amends weapons proliferation regulation

OFAC has published a final rule [86 FR 73105] in this morning's Federal Register amending the Weapons of Mass Destruction Trade Control Regulations at 31 CFR part 539 to add a June 28, 2005, Executive order as an authority, remove the appendix to the part, and modify three definitions referencing the appendix.

The rule was effective upon publication.


OFAC settles with TD Bank for $115K

OFAC has announced TD Bank, N.A. (Wilmington, Delaware), has agreed to pay $115,005.04 to settle its potential civil liability for two separate matters involving apparent violations of the North Korea Sanctions Regulations and the Foreign Narcotics Kingpin Sanctions Regulations.

In the first matter, TD processed 1,479 transactions totaling $382,685.38 and maintained nine accounts on behalf of employees of the North Korean mission to the United Nations without a license from OFAC. In the second matter, TD maintained two accounts for more than four years for a U.S. resident who was listed on OFAC’s list of Specially Designated Nationals and Blocked Persons (“SDN List”).

The apparent violations in both cases resulted from multiple sanctions compliance breakdowns, including screening deficiencies and human error, and highlight the importance of maintaining and following proper escalation procedures and ensuring adequate employee training. The settlements reflect OFAC’s determination that TD’s apparent violations in both matters were voluntarily self-disclosed and were non-egregious.


SEC fines Nikola Corporation $125 million

The Securities and Exchange Commission has announced that Nikola Corporation, a publicly traded company created through a special purpose acquisition company transaction, has agreed to pay $125 million to settle charges that it defrauded investors by misleading them about its products, technical advancements, and commercial prospects. The settlement follows the SEC’s litigated action filed earlier this year against Trevor Milton, the company’s founder and former Chief Executive Officer and Executive Chairman.

According to the SEC’s order, before Nikola had produced a single commercial product, Milton embarked on a public relations campaign aimed at inflating and maintaining Nikola’s stock price. Milton’s statements in tweets and media appearances falsely gave investors the impression that Nikola had reached certain product and technological milestones. The order finds that Milton misled investors about Nikola’s technological advancements, in-house production capabilities, hydrogen production, truck reservations and orders, and financial outlook. The order also finds that Nikola further misled investors by misrepresenting or omitting material facts about the refueling time of its prototype vehicles, the status of its headquarters’ hydrogen station, the anticipated cost and sources of electricity for its planned hydrogen production, and the economic risks and benefits associated with its contemplated partnership with a leading auto manufacturer.

The Commission’s order finds that Nikola violated the antifraud and disclosure control provisions of the federal securities laws. Without admitting or denying the Commission’s findings, Nikola agreed to cease and desist from future violations of the charged provisions, to certain voluntary undertakings, and to pay a $125 million penalty. Nikola also agreed to continue cooperating with the Commission’s ongoing litigation and investigation. The order also establishes a Fair Fund to return the penalty proceeds to victim investors.


OFAC sanctions al-Qa'ida network in Brazil

On Wednesday, Treasury announced that OFAC had designated members of a Brazil-based network of al-Qa’ida-affiliated individuals and their companies for providing support to the terrorist group. Yesterday's action targeted three individuals and two entities, including al-Qa’ida operative in Brazil Haytham Ahmad Shukri Ahmad Al-Maghrabi, as Specially Designated Global Terrorists under Executive Order 13224.

The other individuals and entities designated include Mohamed Sherif Mohamed Mohamed Awadd and his furniture company, Home Elegance Comercio de Moveis EIRELI; and Ahmad Al-Khatib and his furniture company, Enterprise Comercio de Moveis e Intermediacao de Negocios EIRELI.

For further identification information on Al-Maghrabi, Awadd, Al-Khatib, and the two furniture companies, see the December 22, 2021, BankersOnline OFAC Update.


Treasury acts to facilitate humanitarian assistance for Afghanistan

The Treasury Department on Wednesday announced that OFAC has issued three General Licenses to facilitate the continued flow of humanitarian assistance and other support for the Afghan people, underscoring the U.S. commitment to support the people of Afghanistan and continue the U.S. government’s longstanding practice of authorizing the provision of humanitarian goods and services to areas affected by U.S. sanctions.

OFAC also issued a Fact Sheet that highlights and consolidates all the relevant authorizations and guidance facilitating the flow of humanitarian assistance, personal remittances, and other support to the Afghan people, and updated three FAQs and issued six new FAQs to provide clarity on the scope of General Licenses and address some of the questions that OFAC has received regarding its sanctions on the Taliban and the Haqqani Network.

For links to the Fact Sheet, General Licenses and FAQs, see the BankersOnline December 22, 2021, OFAC Update.


FinCEN amends civil penalties rule

FinCEN has published in today's Federal Register an amendment to its Bank Secrecy Act civil penalty regulations relating to the requirements for reporting foreign financial accounts and for reporting transactions with foreign financial agencies. The amendment removes civil penalty language, which was made obsolete with the enactment of the American Jobs Creation Act of 2004. The amendment became effective on publication.

The BankersOnline Regulations page for 31 CFR 1010.820 has been updated to reflect the amendment.


Interagency statement on community bank leverage ratio

The OCC, Board of Governors, and the FDIC on Tuesday issued an Interagency Statement on the Optional Community Bank Leverage Ratio Framework.

The temporary relief measures affecting the framework will expire on December 31, 2021. Beginning on January 1, 2022, the community bank leverage ratio requirement will revert to greater than 9 percent as established under the 2019 final rule. The community bank leverage ratio framework includes a two-quarter grace period that allows a qualifying community bank to continue reporting under the framework and be considered “well capitalized” as long as its leverage ratio falls no more than 1 percentage point below the applicable community bank leverage ratio requirement.

  • The interagency statement serves as a reminder that a qualifying community bank that elects the community bank leverage ratio framework will be subject to a community bank leverage ratio requirement of greater than 9 percent when it submits its March 31, 2022, call report.
  • on January 1, 2022, a qualifying community bank must report a leverage ratio greater than 8 percent to use the two-quarter grace period. The grace period allows a qualifying community bank additional time to build capital and manage its balance sheet to either remain in the framework or prepare to comply with the generally applicable risk-based and leverage capital requirements.
  • The interagency statement clarifies that a community bank would not be viewed negatively within the examination process due solely to its use of the grace period.

Related links:
OCC Bulletin 2021-66
FDIC FIL-81-2021
Federal Reserve Board SR 21-21


CFPB shuts down venture capital-backed LendUp

The CFPB announced on Tuesday that LendUp Loans has agreed to halt making any new loans and collecting on certain outstanding loans, as well as to pay a penalty, to resolve a September 2021 lawsuit alleging that it continued to engage in illegal and deceptive marketing in violation of a 2016 CFPB order. The lawsuit also accuses LendUp of violating fair lending regulations.

LendUp Loans, headquartered in Oakland, California, offered single-payment and installment loans to consumers online and pitched itself as an alternative to payday lenders. LendUp attracted equity and debt investments from prominent investors, including Google Ventures, Andreessen Horwitz, Kleiner Perkins, PayPal Holdings, and QED Investors.

A central component of LendUp’s marketing and brand identity was the “LendUp Ladder.” LendUp told consumers that by repaying loans on time and taking free courses offered through its website, consumers would move up the “LendUp Ladder” and, in turn, receive lower interest rates on future loans and access to larger loan amounts. As alleged in the complaint, in reality, as tens of thousands of LendUp’s customers climbed the “LendUp Ladder,” they failed to qualify for larger loan amounts and continued to be offered similar or higher interest rates compared to previous loans.

LendUp has been subject to multiple enforcement actions by the CFPB. In addition to ordering LendUp in 2016 to stop misrepresenting the benefits of borrowing from the company, the CFPB sued LendUp in 2020 for allegedly violating the Military Lending Act and obtained a judgment against LendUp in that action. In September 2021, the CFPB filed this third action alleging that LendUp:

  • Deceived consumers about the benefits of repeat borrowing
  • Violated the CFPB’s 2016 order
  • Failed to provide timely and accurate adverse-action notices required by fair lending laws

The CFPB has filed a proposed stipulated final judgment and order that, if entered by the court, would prohibit LendUp from (1) making new loans; (2) collecting on outstanding loans to harmed consumers; (3) selling consumer information; and (4) making misrepresentations when providing loans or collecting debt or helping others that are doing so. The order would also impose a $100,000 civil money penalty based on LendUp’s demonstrated inability to pay. The CFPB will work to provide redress to eligible harmed consumers from the Bureau's Civil Penalty Fund.


Landlords and servicers reminded of servicemembers' and veterans' rights

The Consumer Financial Protection Bureau and U.S. Department of Justice issued two joint letters yesterday regarding important legal housing protections for military families. One letter was sent to landlords and other housing providers regarding protections for military tenants. A second letter was sent to mortgage servicers regarding military borrowers who have already exited or will be exiting COVID-19 mortgage forbearance programs in the coming weeks and months.

The letter to landlords and other housing providers reminds property owners of the important housing protections for military tenants, some of whom may have had to relocate or make other changes to their housing arrangements in response to the crisis. While military families enjoy the same legal protections and privileges afforded to all other homeowners and tenants, they also have additional housing protections under the Servicemembers Civil Relief Act (SCRA), which is enforceable by the DOJ and servicemembers themselves.

The letter to mortgage servicers was sent in response to complaints from military families and veterans on a range of potential mortgage servicing violations, including inaccurate credit reporting, misleading communications to borrowers, and required lump sum payments for reinstating their mortgage loans. These complaints are being reviewed for compliance by the CFPB with the Coronavirus Aid, Relief, and Economic Security (CARES) Act and other applicable requirements.
Related links:
CFPB press release


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