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Top Story Compliance Related

09/21/2020

FEMA suspends communities in AK, AZ, IA and WA

OFAC published [85 FR 58294] in Friday's Federal Register a notice that is was suspending, as of September 18, communities in Alaska, Arizona, Iowa and Washington from the National Flood Insurance Program for noncompliance with the floodplain management requirements of the program.

  • Alaska: Fairbanks Northstar Borough and the City and Borough of Juneau
  • Arizona: Goodyear
  • Iowa: Harpers Ferry, Lansing, Postville, Waterville, and unincorporated areas of Allamakee County
  • Washington: Chehalis Reservation, Elma, Montesano, Oakville, and unincorporated areas of Grays Harbor County

09/18/2020

SEC charges former tech company CEO

The Securities and Exchange Commission has announced it has filed an emergency action against Adam Rogas, the former CEO of Las-Vegas-based NS8 Inc., which purports to provide fraud detection and prevention software to e-commerce merchants, seeking an asset freeze and charging Rogas with defrauding investors by falsely claiming millions of dollars in revenue. The SEC complaint alleges Rogas, from at least 2018 through June 2020, altered NS8's bank statements to show millions of dollars in payments from customers. Rogas allegedly sent the falsified bank statements and revenue figures on a monthly basis to NS8's finance department, which used them to prepare NS8's financial statements. In at least two securities offerings, NS8 and Rogas allegedly provided investors and prospective investors the false financial statements, showing millions of dollars in revenue and assets and other information incorporating the falsified revenue figures. The SEC alleges that as a result of Rogas's fraud, NS8 raised approximately $123 million in 2019 and 2020, and that Rogas ultimately pocketed at least $17.5 million of investor funds.

09/18/2020

OCC enforcement actions

The OCC has released a list of enforcement orders issued in the month of August.

  • Two former senior vice presidents; the former chairman, CEO and president; and four former directors of City National Bank of New Jersey, Newark, New Jersey, were issued consent civil money penalty orders in amounts ranging from $3,000 to $70,000 (totaling $124,000) for their failures to ensure that the bank had an adequate BSA/AML compliance program, adequate risk controls, and adequate staffing of its BSA/AML function while the bank was taking on high-risk new accounts, including brokered deposits.
  • a former banker with People's United Bank, N.A., Bridgeport, Connecticut, was issued a consent prohibition order after the Comptroller found that she had stolen cash from her assigned cash drawer and made fraudulent entries so that the drawer appeared to be in balance

09/18/2020

OFAC targets Hizballah and Iranian cyber actors

The Treasury Department announced Thursday that OFAC has sanctioned two Lebanon-based companies, Arch Consulting and Meamar Construction, for being owned, controlled, or directed by Hizballah. Additionally, OFAC designated Sultan Khalifah As’ad, a Hizballah Executive Council official, who is closely associated with both companies.

Treasury also announced that OFAC has imposed sanctions on Iranian cyber threat group Advanced Persistent Threat 39, 45 associated individuals, and one front company, Rana Intelligence Computing Company, through which the Government of Iran (GOI) employed a years-long malware campaign that targeted Iranian dissidents, journalists, and international companies in the travel sector. Concurrent with OFAC’s action, the U.S. Federal Bureau of Investigation (FBI) released detailed information about APT39 in a public intelligence alert.

For identification information on the entities and individuals sanctioned by OFAC's actions, see BankersOnline's OFAC Update.

09/18/2020

Tech company settles liability for apparent OFAC violations

OFAC has announced an $894,111 settlement with Comtech Telecommunications Corp., based in Melville, New York, and its wholly-owned subsidiary, Comtech EF Data Corp., headquartered in Tempe, Arizona for four apparent violations of the Sudanese Sanctions Regulations.

Between June 2014 and October 2015, Comtech, through its subsidiary EF Data, indirectly exported warrantied satellite equipment and facilitated services and training to a government-owned entity in Sudan in apparent violation of the SSR. OFAC determined that Comtech voluntarily disclosed the apparent violations and that the apparent violations constituted an egregious case.

09/17/2020

FATF AML and Terrorist Financing report

The Financial Action Task Force (FATF) has released a report, Virtual Assets – Red Flag Indicators of Money Laundering and Terrorist Financing, to help national authorities detect whether virtual assets are being used for criminal activity. Based on more than 100 case studies collected by members of the FATF Global Network, it highlights the most important red flag indicators that could suggest criminal behavior. Key indicators in this report focus on:

  • Technological features that increase anonymity, such as the use of peer-to-peer exchanges websites, mixing or tumbling services or anonymity-enhanced cryptocurrencies
  • Geographical risks – criminals can exploit countries with weak, or absent, national measures for virtual assets
  • Transaction patterns that are irregular, unusual or uncommon, which can suggest criminal activity
  • Transaction size – if the amount and frequency has no logical business explanation
  • Sender or recipient profiles – unusual behavior can suggest criminal activity
  • Source of funds or wealth, which can relate to criminal activity

09/17/2020

States and FTC halt charity scam

The Federal Trade Commission reports a sprawling fundraising operation that allegedly scammed consumers out of millions of dollars will be permanently banned from charitable fundraising along with its owner and others involved in its operation as a result of a lawsuit brought by the Federal Trade Commission and Attorneys General of New York, Virginia, Minnesota, and New Jersey. A complaint filed by the Commission and the states alleges that the defendants served as the primary fundraisers for a number of sham charities that were the subject of numerous law enforcement actions. It also alleges that the sham charities claimed to use consumers’ donations to help homeless veterans, retired and disabled law enforcement officers, breast cancer survivors, and others in need. In fact, these organizations spent almost none of the donations on the promised activities.

Under the proposed settlements, all of the defendants will be permanently prohibited from participating in any charity fundraising, and from deceiving consumers in any other fundraising effort, including for political action committees (PACs). The defendants will be required to clearly inform consumers at the time they ask for money that any donations are not charitable and not eligible for tax deductions. In addition, the defendants will be subject to significant monetary judgments and required to surrender assets. The funds being surrendered by the defendants will be paid to the State of New York, which will contribute the funds on behalf of New York, Virginia, and New Jersey to legitimate charities that perform services that mirror those promised by the sham charities.

09/17/2020

OFAC sanctions two Russians for virtual currency theft

Yesterday, in a coordinated action with the Departments of Justice and Homeland Security, OFAC sanctioned two Russian nationals for their involvement in a sophisticated phishing campaign in 2017 and 2018 that targeted customers of two U.S.-based and one foreign-based virtual asset service providers. American citizens and businesses were among the victims of this malicious cyber-enabled activity, which resulted in combined losses of at least $16.8 million.

Danil Potekhin and Dmitrii Karasavidi were designated pursuant to Executive Order 13694, as amended by E.O. 13757, which targets malicious cyber-enabled activities, including those related to the significant misappropriation of funds or personal identifiers for private financial gain. Potekhin and Karasavidi are also the subjects of an indictment unsealed today by the Department of Justice.

As a result of yesterday’s action, all property and interests in property of the designated persons that are in the possession or control of U.S. persons or within or transiting the United States are blocked, and U.S. persons generally are prohibited from dealing with them. for further identification information on Potekhin and Karasavidi, see BankersOnline's OFAC Update.

09/17/2020

FinCEN proposes amending AML program requirements

FinCEN has published [85 FR 58023] an advance notice of proposed rulemaking in today's Federal Register seeking public comment on potential regulatory amendments to establish that all covered financial institutions subject to an anti-money laundering program requirement must maintain an “effective and reasonably designed” anti-money laundering program.

The ANPRM says any such amendments would be expected to further clarify that such a program assesses and manages risk as informed by a financial institution’s risk assessment, including consideration of anti-money laundering priorities to be issued by FinCEN consistent with the proposed amendments; provides for compliance with Bank Secrecy Act requirements; and provides for the reporting of information with a high degree of usefulness to government authorities.

The regulatory amendments under consideration are intended to modernize the regulatory regime to address the evolving threats of illicit finance, and provide financial institutions with greater flexibility in the allocation of resources, resulting in the enhanced effectiveness and efficiency of anti-money laundering programs.

The ANPRM also seeks comment on proposals to impose an explicit requirement for a risk assessment process and for the Director of FinCEN to issue a list of national AML priorities, to be called FinCEN’s Strategic Anti-Money Laundering Priorities, every two years.

Comments on the ANPRM will be accepted for 60 days following publication, through Monday, November 16, 2020.

09/16/2020

Investment training firm to pay duped consumers

The Federal Trade Commission has announced a settlement that requires Online Trading Academy (OTA) to offer debt forgiveness to thousands of consumers who purchased its “training programs,” while the company’s founder and other individuals will together pay between $5 and $9.1 million and turn over assets. The settlement is expected to result in more than $10 million to benefit injured consumers.

The FTC alleged that OTA had no evidence that purchasers were likely to realize advertised profits, and that the company’s own surveys and third party trading data showed that most purchasers made little to no money. OTA also claimed that its instructors and salespeople were active, successful traders, pointing consumers to their supposed success as evidence the strategy worked. But the Commission alleged those claims were false or unsubstantiated, and that several high-profile OTA pitchmen admitted they did not make significant money trading. Finally, the FTC charged that when consumers realized the truth and asked for their money back, OTA illegally used form contracts to prevent them from telling the government or other consumers about OTA’s deception.

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