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Top Story Compliance Related

07/20/2021

Proposed guidance published

The OCC, FDIC, and Federal Reserve have published [86 FR 38182] their proposed Interagency Guidance on Third-Part Relationships Risk Management, which was announced last week. Comments on the proposal are due by September 17, 2021.

07/20/2021

Large bank resolution plans released

The Federal Reserve Board and FDIC have released the public sections of eight large domestic firms' resolution plans, which are required by the Dodd-Frank Act and commonly known as living wills. Resolution plans describe the company's strategy for rapid and orderly resolution under the Bankruptcy Code in the event of material financial distress or failure. Eight firms were required to submit targeted resolution plans by July 1: Bank of America Corporation; The Bank of New York Mellon Corporation; Citigroup Inc.; The Goldman Sachs Group, Inc.; JPMorgan Chase & Co.; Morgan Stanley; State Street Corporation; and Wells Fargo & Company.

The public sections of the resolution plans are available on the FDIC's and the Federal Reserve's websites.

07/19/2021

Advisory highlights growing Hong Kong risks

On Friday, the U.S. Departments of State, Commerce, Homeland Security and the Treasury issued an advisory to highlight growing risks associated with actions undertaken by the Government of the People’s Republic of China and the Government of the Hong Kong Special Administrative Region (SAR) that could adversely impact U.S. companies that operate in the Hong Kong SAR of the People’s Republic of China.

Businesses, individuals, and other persons, including academic institutions, research service providers, and investors that operate in Hong Kong, or have exposure to sanctioned individuals or entities, should be aware of changes to Hong Kong’s laws and regulations. This new legal landscape, including the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region, could adversely affect businesses and individuals operating in Hong Kong. As a result of these changes, they should be aware of potential reputational, regulatory, financial, and, in certain instances, legal risks associated with their Hong Kong operations.

These risks fall into four categories: risks for businesses following the imposition of the NSL; data privacy risks; risks regarding transparency and access to critical business information; and risks for businesses with exposure to sanctioned Hong Kong or PRC entities or individuals.

OFAC also designated seven individuals under its Hong Kong Executive Order 13936 sanctions. The July 16, 2021, BankersOnline OFAC Update has identification details.

07/19/2021

Robocalling septic tank cleaner company down the drain

The Federal Trade Commission has announced that the owners of a New Jersey-based company that sells septic tank cleaning products agreed to a permanent ban on telemarketing and will pay more than $1.6 million to settle Federal Trade Commission charges that the company and its telemarketer made illegal robocalls to consumers, including tens of millions of calls to numbers listed on the agency’s Do Not Call Registry. In addition, the defendants will turn over a residential property as part of the settlement.

The FTC's complaint indicted Environmental Safety International, Inc. or ESI; ESI officers brothers Joseph Carney and Sean Carney; and their brother Raymond Carney, who acted together to initiate more than 45 million illegal telemarketing calls to consumers nationwide between January 2018 and March 2019 to promote ESI’s “Activator 1000” line of septic tank cleaning products. The FTC alleges that 31 million of those calls were made to numbers on the DNC Registry. The Department of Justice filed the complaint and proposed orders on the FTC’s behalf.

The complaint also alleges that ESI sent letters to consumers who agreed to buy their products but had unpaid invoices, falsely claiming that they would be referred to a “national collection agency” or to an attorney. However, ESI never took either of these actions.

In addition to the bans on telemarketing, the settlement orders impose $10.2 million civil penalty judgments against all defendants, which will be partially suspended after Joseph and Sean Carney pay $1,646,210 to the U.S. Treasury, and Raymond Carney pays $15,000.

In addition, Joseph and Sean Carney are prohibited from making material misrepresentations to consumers, including that they would be referred to an attorney or collection agency. They are prohibited from billing or attempting to collect payments from any consumers in connection with the sale of their septic tank cleaning products, and are required to notify all ESI customers with unpaid balances that they no longer have to pay ESI because their balances have been cancelled. Joseph and Sean Carney must also apply for ESI’s dissolution within 30 days.

07/15/2021

FinCEN Exchange on ransomware

FinCEN has announced it will convene a FinCEN Exchange in August 2021 with representatives from financial institutions, other key industry stakeholders, and federal government agencies to discuss ongoing concerns regarding ransomware, as well as efforts by the public and private sectors. The FinCEN Exchange will build upon FinCEN’s November 2020 event on ransomware. FinCEN anticipates that this FinCEN Exchange will assist its government and private sector partners to inform next steps to address ransomware and focus resources to mitigate the threat. This announcement is part of a government-wide effort to combat ransomware.

According to FinCEN, ransomware attacks are a growing concern for the financial sector, given that financial institutions can be targeted by ransomware attacks as well as reputational and financial integrity concerns about the role financial institutions might play in the processing of ransom payments. Efforts to detect and report ransomware payments are vital to prevent and deter ransomware attacks, and to hold these attackers accountable for their crimes. In October 2020, FinCEN issued Advisory FIN-2020-A006 to alert financial institutions to predominant trends, typologies, and potential indicators of ransomware and associated money laundering activities. In addition, in June 2021, FinCEN highlighted ransomware as a particularly acute cybercrime concern in its issuance of the first government-wide priorities for anti-money laundering and countering the financing of terrorism policy.

07/14/2021

SEC takes action against teachers' retirement plan

The Securities and Exchange Commission has announced that TIAA-CREF Individual & Institutional Services LLC (TC Services), a subsidiary of Teachers Insurance and Annuity Association of America (TIAA), will pay $97 million to settle charges of inaccurate and misleading statements and a failure to adequately disclose conflicts of interest to thousands of participants in TIAA record-kept employer-sponsored retirement plans (ESPs).

According an order filed by the SEC, from January 1, 2013, through March 30, 2018, TC Services and its Wealth Management Advisers (WMAs) did not adequately disclose the full nature and extent of their conflicts of interest in recommending to clients that they roll over their retirement assets into a managed account program called “Portfolio Advisor.” The order finds that TC Services failed to adequately disclose compensation practices that incentivized the firm and its WMAs to recommend Portfolio Advisor for reasons other than a client’s particular investment needs. Further, TC Services trained its WMAs to make, and its WMAs made, representations that they offered “objective” and “non-commissioned” advice, “put the client first,” and acted in the client’s best interest while holding themselves out as fiduciaries. TC Services simultaneously applied continual pressure to compel WMAs to prioritize the rollover of ESP assets into Portfolio Advisor over lower cost alternatives. The order also finds that TC Services failed to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act in connection with rollover recommendations.

Without admitting or denying the SEC’s findings, TC Services agreed to cease and desist from committing or causing any future violations of these provisions, be censured, and pay disgorgement, prejudgment interest, and a civil penalty totaling $97 million that will be distributed to investors through a Fair Fund. The $97 million will be distributed to investors affected by the misconduct and settles both the SEC’s case and a parallel action announced yesterday by the Office of the New York Attorney General

07/14/2021

Agencies propose risk management guidance for 3rd-party relationships

The federal bank regulatory agencies (Board of Governors, FDIC, and OCC) on Tuesday requested public comment on proposed guidance designed to help banking organizations manage risks associated with third-party relationships, including relationships with financial technology-focused entities. The proposed guidance is intended to assist banking organizations in identifying and addressing the risks associated with third-party relationships and responds to industry feedback requesting alignment among the agencies with respect to third-party risk management guidance.

Banking organizations that engage third parties to provide products or services or to perform other activities remain responsible for ensuring that such outsourced activities are conducted in a safe and sound manner and in compliance with all applicable laws and regulations, including consumer protection laws.

Comments must be received within 60 days of the proposed guidance's publication in the Federal Register.

07/13/2021

CFPB hits fintech GreenSky with $11.9M consent order

The CFPB announced Monday it had taken action against GreenSky LLC, a fintech non-bank institution in Atlanta, Georgia, for enabling contractors and other merchants to take out loans on behalf of thousands of consumers who did not request or authorize them. The CFPB issued a consent order against GreenSky requiring the company to refund or cancel up to $9 million in loans for customers harmed by its illegal conduct, pay a $2.5 million civil penalty, and implement new procedures to prevent future fraudulent loans.

GreenSky used merchants, primarily those providing home improvements, to promote and offer financing to customers before making on-the-spot lending decisions based on criteria provided by its partner banks. Proceeds from GreenSky’s loans, ranging from a few thousand to tens of thousands of dollars, bypass consumers and are disbursed directly to merchants following the merchants’ application for payment. Some consumers complained that they never applied for a loan or even heard of GreenSky before receiving billing statements, collection letters, and calls from the company.

The CFPB found that GreenSky engaged in unfair practices against their customers in violation of the Consumer Financial Protection Act of 2010 (CFPA). For additional details and a link to the CFPB's consent order, see "GreenSky pays $11.9 million for unauthorized consumer loans," in BankersOnline's Penalty pages.

07/13/2021

FTC charges two companies for aiding student loan relief scammers

The Federal Trade Commission on Monday announced two Florida companies and their CEO will be permanently barred from offering payment-processing services to settle Federal Trade Commission allegations that they aided a criminal student debt relief scam that bilked $62 million from thousands of students and their families.

According to the FTC’s complaint, Moneta Management, LLC, Moneta Management, Inc., and their CEO Michael Todd Greene knowingly provided false or deceptive information to credit card and ACH processors to obtain merchant processing for the scam operated by Brandon Frere and his three companies. Frere and his companies reached a settlement with the FTC in November 2020 and also pleaded guilty to federal criminal charges in 2019.

Greene and his companies submitted payment processing applications that concealed Frere’s scam, denied that Frere and his companies were offering consumers prohibited debt relief services, and ignored repeated warnings and direct evidence that Frere’s scam was defrauding consumers and violating the Telemarketing Sales Rule, according to the complaint. The accounts that Greene and his companies helped create for Frere’s scam allowed the processing of credit card and debit payments from consumers.

As part of the settlement with the FTC, Greene and his two companies will be barred from payment processing, acting as a sales agent or independent sales organization, and from assisting and facilitating unfair and deceptive trade practices. The proposed final order also imposes a monetary judgment of $28.6 million on Greene and his companies, which will be partially suspended after payment of $20,493 due to their inability to pay the full amount. They will be required to pay the full amount if they are found to have misrepresented their finances.

07/13/2021

New OFAC Venezuela-related license

OFAC announced yesterday it had issued Venezuela-related General License 40 and two related FAQs.

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