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Top Story Compliance Related

03/22/2024

Agencies postpone applicability dates on some parts of CRA update rule

Just eleven days before the effective date of most provisions of their revised Community Reinvestment Act regulations issued in October 2023 (published on February 1, 2024), the Federal Reserve Board, OCC, and FDIC have jointly announced a supplemental interim final rule that extends the applicability date of certain provisions.

To promote clarity and consistency, the agencies extended the applicability date of the facility-based assessment areas and public file provisions from April 1, 2024, to January 1, 2026. Therefore, banks will not have to make changes to their assessment areas or their public files as a result of the 2023 CRA final rule until January 1, 2026. This extension aligns these provisions with other substantive parts of the 2023 CRA final rule that are applicable on January 1, 2026. For example, all provisions about where banks are evaluated will now apply on the same date. Comments on the extended applicability date must be received 45 days after the rule is published in the Federal Register.

The supplemental interim final rule, which becomes effective on April 1, 2024, also includes technical, non-substantive amendments to the CRA final rule and related agency regulations that reference it. For example, one of these technical amendments clarifies that banks do not need to make changes to their public notices until January 1, 2026.

Federal Reserve Board Governor Michelle W. Bowman, who has criticized the October 2023 rule as "unnecessarily complex and extraordinarily lengthy," issued a statement of concern that the change announced yesterday "will not be the only significant issue that will require further consideration given the length and complexity of the final rule as the agencies continue to work toward implementation of the changes. ... This interim final rule illustrates the rushed, overly complex, and unwieldy nature of the CRA rulemaking."

03/22/2024

FDIC proposes updates to policy statement on bank mergers

The FDIC has announced its Board of Directors yesterday approved a request for public comment on proposed revisions to the agency's Statement of Policy on Bank Merger Transactions.

The revised Statement of Policy (SOP) reflects legislative and other developments that have occurred since it was last amended in 2008, including the establishment of the statutory factor regarding the risk to the stability of the United States banking or financial system. The revised SOP is principles based; describes the types of applications subject to FDIC approval; addresses each statutory factor separately; and highlights other relevant matters and considerations, such as related statutes pertaining to interstate mergers, and applications from non-banks or banks that are not traditional community banks. Further, the revised SOP reflects consideration of comment letters received in response to the FDIC’s March 2022 Request for Information and Comment on Rules, Regulations, Guidance, and Statements of Policy Regarding Bank Merger Transactions.

Comments on the proposed revised Statement of Policy will be accepted for 60 days following publication in the Federal Register.

03/21/2024

OCC opens registration for Project REACh summit on financial inclusion

The OCC has announced that registration is open for its Project REACh Financial Inclusion Summit on May 29-30, 2024, at its headquarters in Washington, D.C.

The OCC’s Project REACh, or the Roundtable for Economic Access and Change, brings together leaders from the banking industry, national civil rights organizations, business, technology, and community development to identify and reduce specific barriers that prevent underserved and minority communities from full, equal, and fair participation in the nation’s economy.

Registration is required to attend the Summit and is open until May 15, 2024, or until full, whichever occurs first. For security reasons, attendees will be subject to screening and must present a valid government-issued identification to enter the building.

The Summit will be recorded, and the video will be posted to OCC.gov.

Information on how to register to attend the Summit and the agenda are available on the Summit's webpage.

03/21/2024

OCC reports March 2024 enforcement actions

The OCC has released enforcement actions that it took during the month of March 2024:

  • Its previously announced Cease and Desist Order and $250 million Civil Money Penalty against JPMorgan Chase Bank, N.A., for deficiencies in its trade surveillance program.
  • An Order of Prohibition against Samantha Cherry, Former Manager at a St. Louis, Missouri, branch of UMB Bank, N.A., Kansas City, Missouri, for embezzling $439,000 in cash from the bank.
  • A Personal Cease and Desist Order and $30,000 Civil Money Penalty against Nicholas Jurun, Former Mortgage Loan Originator and Sales Manager at a Rancho Palos Verdes office of Barrington Bank & Trust Company, N.A., Barrington, Illinois, for making payments to receive referrals for mortgage loans, attempting to hide at least two of these payments from the bank with false documentation, and engaging in a conflict of interest.
  • An Order of Prohibition and $150,000 Civil Money Penalty against Thomas Lopp, Former President, Chief Operating Officer, and Chief Financial Officer, Sterling Bank and Trust, FSB Southfield, Michigan, for failing to appropriately oversee the bank’s operation of its Advantage Loan Program, supervise bank employees, and intervene when an individual who was not a bank officer issued directives to bank employees and otherwise participated in bank operations.
  • An Order of Prohibition against Elijah V. McBride-Bey, Former Personal Banker, at a North Waltham, Massachusetts, branch of Santander Bank, N.A., Wilmington, Delaware, for establishing unauthorized online banking access and using that access to make unauthorized withdrawals totaling approximately $11,140 from an elderly customer’s account.
  • An Order of Prohibition and $120,000 Civil Money Penalty against Michael Montemayor, Former President of Retail and Commercial Banking, Sterling Bank and Trust, FSB, Southfield, Michigan, for failing to appropriately oversee the bank’s operation of its Advantage Loan Program, and appropriately supervise bank employees, or escalate concerns to the board’s attention.
  • An Order of Prohibition against Juan F. Velez Restrepo, Former Personal Banker at a New York branch of Citibank, N.A., Sioux Falls, South Dakota, for abusing his access to an elderly bank customer’s account and misappropriating over $166,000 in customer funds.

03/21/2024

Treasury announces OFAC actions

Yesterday, the Treasury Department announced that OFAC had targeted three procurement networks –– based in Iran, Türkiye, Oman, and Germany –– that have supported Iran’s ballistic missile, nuclear, and defense programs.

The Treasury Department also reported that OFAC had designated two individuals and two entities for services they provided the Government of the Russian Federation in connection with a foreign malign influence campaign, including attempting to impersonate legitimate media outlets.

For the names and identification information of the designated parties, see the March 20, 2024, BankersOnline OFAC Update.

03/20/2024

FDIC demands three companies stop false and misleading statements

The FDIC yesterday announced it has issued letters demanding three companies and certain associated parties cease and desist from making false and misleading statements about FDIC deposit insurance. The FDIC is demanding that PrizePool, Inc., AmeriStar, LLC, and HighLine Gold, LLC take immediate corrective action to address these false or misleading statements. In the case of AmeriStar and HighLine Gold, the FDIC has reason to believe these companies are related entities sharing several of the same principals and the same physical address, and therefore, issued a joint letter to them.

Based upon evidence collected by the FDIC, these companies and certain associated parties made false representations by: (1) stating or suggesting they are FDIC-insured or that certain uninsured financial products are insured by the FDIC; (2) misusing the FDIC name or logo; (3) misrepresenting the nature or extent of deposit insurance; and/or (4) failing to clearly identify the insured depository institutions with which they have a relationship for the placement of customer deposits and into which funds may be deposited. The evidence suggests these misrepresentations are causing harm, or have the potential to cause harm, to consumers.

03/20/2024

Outlook Live event rescheduled

The Philadelphia Federal Reserve Bank has reported that the Outlook Live event, Compliance Resources, Learning Where to Find Answers to Your Compliance Questions, originally scheduled for March 20, 2024, has been rescheduled for Wednesday, April 17, 2024.

Those who preregistered for the March session do not have to re-register. Additional registrations can be made HERE.

03/19/2024

Two investment advisers charged for false and misleading statements

The Securities and Exchange Commission has announced settled charges against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for making false and misleading statements about their purported use of artificial intelligence (AI). The firms agreed to settle the SEC’s charges and pay $400,000 in total civil penalties.

According to the SEC’s order against Delphia, from 2019 to 2023, the Toronto-based firm made false and misleading statements in its SEC filings, in a press release, and on its website regarding its purported use of AI and machine learning that incorporated client data in its investment process. For example, according to the order, Delphia claimed that it “put[s] collective data to work to make our artificial intelligence smarter so it can predict which companies and trends are about to make it big and invest in them before everyone else.” The order finds that these statements were false and misleading because Delphia did not in fact have the AI and machine learning capabilities that it claimed. The firm was also charged with violating the Marketing Rule, which, among other things, prohibits a registered investment adviser from disseminating any advertisement that includes any untrue statement of material fact.

In the SEC’s order against Global Predictions, the SEC found that the San Francisco-based firm made false and misleading claims in 2023 on its website and on social media about its purported use of AI. For example, the firm falsely claimed to be the “first regulated AI financial advisor” and misrepresented that its platform provided “[e]xpert AI-driven forecasts.” Global Predictions also violated the Marketing Rule, falsely claiming that it offered tax-loss harvesting services, and included an impermissible liability hedge clause in its advisory contract, among other securities law violations.

Without admitting or denying the SEC’s findings, Delphia and Global Predictions consented to the entry of orders finding that they violated the Advisers Act and ordering them to be censured and to cease and desist from violating the charged provisions. Delphia agreed to pay a civil penalty of $225,000, and Global Predictions agreed to pay a civil penalty of $175,000.

03/19/2024

Two lenders fined $59M; falsely promised fast PPP application processing

The Federal Trade Commission yesterday reported it has taken action against two companies – Biz2Credit and Womply – that made false promises to small businesses seeking to take part in the Paycheck Protection Program (PPP), delaying and sometimes preventing them from obtaining funds they needed to keep their businesses afloat during the COVID-19 pandemic.

The companies have agreed to settle the FTC’s charges against them: Biz2Credit will pay $33 million and Womply will pay $26 million to the FTC for small businesses harmed by their deceptive conduct. These are the largest damages amounts ever secured by the agency under Section 19 of the FTC Act, and include money consumers lost because of the companies’ conduct, even if consumers made no payments directly to the companies.

Biz2Credit, Inc., and its subsidiary, Itria Ventures, have agreed to pay $33 million in damages to settle the Commission’s charges that they deceptively advertised that consumers’ emergency PPP loan applications would be processed in an average of 10-14 business days when, in reality, the average processing took well over a month. The FTC’s complaint alleges that Biz2Credit’s application processing was riddled with delays, and the average processing time was double what the defendants claimed, with tens of thousands of consumers waiting more than two months for a final determination. Even though they were aware of these delays, the defendants continued to make their false timing claims to consumers until nearly the end of the program. The FTC’s complaint also says that Biz2Credit unfairly ignored many consumers’ repeated and urgent pleas to withdraw their loan applications. As a result, the defendants delayed and sometimes even prevented these consumers from obtaining PPP funds elsewhere.

[UPDATE Mar. 26, 2024: A spokesperson for Biz2Credit provided a statement regarding its settlement with the FTC saying, in part, that "Biz2Credit demonstrated to the FTC that its 12-14 business day average processing time estimate for PPP loans was accurate for all bona fide PPP loan applications. Fraudulent and ineligible applications, which took longer to process, were included by the FTC in its calculations. Biz2Credit carefully reviewed and ultimately declined applications that it determined were potentially fraudulent or ineligible under PPP program rules. ... Biz2Credit’s decision to enter into the FTC settlement was a pragmatic business decision given the cost and uncertainty of litigation. There was no admission of wrongdoing by Biz2Credit in the settlement."]

Womply and its CEO, Toby Scammell, have agreed to pay $26 million to settle FTC charges they preyed on small businesses in desperate need of PPP funding. The FTC’s complaint alleges they widely advertised that small businesses – particularly one-person businesses like gig workers – could successfully get PPP funding when they applied through Womply. The complaint charges, however, that more than 60 percent of Womply applications never resulted in funding. Womply and Scammell allegedly also advertised that their automated processes and good customer service would help small businesses secure PPP loans fast. In fact, applicants regularly faced significant issues that slowed down or fully hindered their applications and were often unable to receive customer service assistance they were promised, according to the complaint.

03/18/2024

U.S. targets illicit shipments

On Friday, the Treasury Dapartment reported that OFAC had taken action against Marshall Islands-registered shipping company Vishnu Inc., whose vessel, the LADY SOFIA, is involved in illicit shipments to the People’s Republic of China in support of Iran’s Islamic Revolutionary Guard Corps-Qods Force and Houthi financial facilitator Sa’id al-Jamal, who is sanctioned under U.S. counterterrorism authorities.

For identification information on Vishnu Inc. and the LADY SOFIA, see Friday's BankersOnline OFAC Update.

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