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Top Story Compliance Related

03/12/2020

FDIC extends comment period

The FDIC has announced it has extended the comment period on its request for information on modernizing the agency's signage and advertising requirements (see our 2/20/2020 Top Story), scheduled to end March 19, through April 20, 2020.

03/12/2020

OFAC sanctions actions

Treasury announced yesterday that OFAC had designated four Mexican businesses pursuant to the Foreign Narcotics Kingpin Designation Act because of their links to the Cartel de Jalisco Nueva Generacion (CJNG) and the Los Cuinis Drug Trafficking Organization (Los Cuinis), two closely allied Mexican drug trafficking organizations. CJNG and Los Cuinis funnel fentanyl and other deadly drugs into the United States, fueling drug addiction. Yesterday’s action was the result of OFAC’s ongoing collaboration with the Drug Enforcement Administration (DEA), which executed Project Python, a nationwide operation to disrupt CJNG through a series of coordinated arrests, seizures, and indictments.

Treasury also announced OFAC's designation of Anselem Sanyatwe and Owen Ncube for their involvement in human rights abuses, including directing an attack on peaceful demonstrators and political opponents in Zimbabwe. OFAC concurrently removed sanctions on Ray Kaukonde, Shuvai Ben Mahofa, Sithokozile Mathuthu, and Naison Ndlovu, all of whom were previously designated pursuant to Treasury’s Zimbabwe sanctions authorities.

For identification information on all of these OFAC actions, see BankersOnline's OFAC Update..

03/11/2020

Florida investment advisor assets frozen

On March 6, the Securities and Exchange Commission obtained an asset freeze and other emergency relief against Florida-based investment adviser Kinetic Investment Group LLC and its managing member, Michael Scott Williams, in connection with an alleged fraudulent, unregistered securities offering that raised approximately $39 million from at least 30 investors located mostly in Florida and Puerto Rico. According to the SEC’s complaint, filed in the U.S. District Court for the Middle District of Florida, Kinetic Group and Williams fraudulently raised millions of dollars by making material misrepresentations to investors whom they solicited to invest in Kinetic Funds I LLC, a purported hedge fund that they managed. The defendants allegedly represented, among other things, that Kinetic Funds’ largest sub-fund invested solely in U.S.-listed financial products and that at least 90% of its portfolio was hedged using listed options. The SEC alleges, however, that Williams actually invested a significant part of the sub-fund’s assets in a private start-up company owned by Williams. The complaint further alleges Williams misappropriated at least $6.3 million through undisclosed loans to himself and his entities.

03/11/2020

FTC settles with credit repair company that misled customers

The Federal Trade Commission has announced that a Colorado-based credit repair company and its owner have agreed to settle Commission charges they misled consumers with promises to “drastically and immediately” improve credit scores and increase access to lower rates on mortgages.

The FTC filed a complaint alleging the operators of BoostMyScore.net guaranteed consumers that, in exchange for fees ranging from $325 to $4,000, they could “piggyback” on unrelated consumers’ good credit, artificially inflating their own credit score in the process. In piggybacking, a consumer pays to be listed on another person’s well-maintained credit account, ostensibly receiving the benefit of the good account on their own credit even though they can’t access the account. In this case, the FTC alleges, defendants charged struggling consumers steep, illegal fees and made unsupported promises about how piggybacking would pave the way to new credit, including mortgages and other loan products.

Under the terms of the proposed settlement with the FTC that will soon be filed with the court, BoostMyScore, LLC, BMS, Inc., and William O. Airy will be prohibited from selling fake access to another consumer’s credit as an authorized user and from collecting advance fees for credit repair services, as well as other violations of the Credit Repair Organization Act. They will also be prohibited from misrepresenting a product or service as being legal, as well as from misrepresenting the terms of a refund or return policy. The defendants also will be banned from further violations of the Telemarketing Sales Rule. The settlement also includes a monetary judgment of $6,630,678, which will be partially suspended upon payment of $64,863 due to the defendants’ inability to pay.

03/10/2020

Fifth Third sued by CFPB

The CFPB has announced its filing of a complaint in federal district court in the Northern District of Illinois against Fifth Third Bank, National Association, Cincinnati, Ohio.

The Bureau alleges that for several years Fifth Third, without consumers’ knowledge or consent, opened deposit and credit-card accounts in consumers’ names; transferred funds from consumers’ existing accounts to new, improperly opened accounts; enrolled consumers in unauthorized online-banking services; and activated unauthorized lines of credit on consumers’ accounts. The Bureau specifically alleges that for years and continuing through at least 2016, Fifth Third used a “cross-sell” strategy to increase the number of products and services it provided to existing customers; used an incentive-compensation program to reward selling new products; and conditioned employee-performance ratings and, in some instances, continued employment on meeting ambitious sales goals. The Bureau further alleges that, despite knowing since at least 2008 that employees were opening unauthorized consumer-financial accounts, Fifth Third took insufficient steps to detect and stop the conduct and to identify and remediate harmed consumers.

The Bureau's complaint seeks injunctive relief, redress for affected consumers, and a civil money penalty, but is not a finding or ruling that Fifth Third has violated the law.

03/10/2020

OFAC removes Terrorism Sanctions Rule

A final rule has been published a final rule [85 FR 13746] to remove the Terrorism Sanctions Regulations from the Code of Federal Regulations, effective today. OFAC is taking this action because the national emergency on which 31 CFR part 595 was based was terminated by the president on September 9, 2019.

03/10/2020

February Fed CRA evaluation ratings

Our check of the Federal Reserve Board's list of Community Reinvestment Act evaluation ratings reveals that the Fed made 13 ratings public in February 2020. Eleven of the banks whose evaluations were made public received "Satisfactory" ratings. Congratulations to the two banks that received "Outstanding" ratings:

03/09/2020

Bureau announces steps to prevent consumer harm

The CFPB has announced three steps it is taking to advance its strategy for preventing consumer harm:

  • Implementing an advisory opinion program to provide clear guidance to assist companies in better understanding their legal and regulatory obligations through advisory opinions;
  • Amending and reissuing its responsible business conduct bulletin, which articulates that the Bureau intends to provide credit to entities for their responsible conduct based on its extent and significance; and
  • Engaging with Congress to advance proposed legislation that would authorize the Bureau to award whistleblowers who report violations of federal consumer financial law.

Under the advisory opinion program, parties will submit requests for an advisory opinion to the Bureau via its website. To increase transparency and to provide regulatory certainty to all regulated entities and other stakeholders, the Bureau will publish the responding advisory opinion in the Federal Register and on its website. The opinion will include an interpretation of the Bureau’s existing rules.

The revised responsible business conduct guidelines list four categories of responsible conduct -- self-assessing, self-reporting, remediation, and cooperation -- that can be considered with other factors in addressing violations of consumer financial law in supervisory and enforcement matters.

The proposed whistleblower provisions would provide incentives for employees to report wrongdoing to the Bureau that can assist in advancing enforcement cases, especially fair lending cases.

UPDATE: Responsible Business Conduct Bulletin 2020-01 was published at on 3/30/2020.

03/09/2020

FATF guidance on Digital IDs

The Financial Action Task Force (FATF) has issued a Guidance on Digital ID, which reports the number of digital transactions are growing at an estimated 12.7 % annually. By 2022, an estimated 60% of global GDP will be digitized. In any financial transaction, knowing your customer is essential to ensure that the funds involved are not linked to crime and terrorism. However, in a digital context, traditional verification tools do not apply. The FATF has developed the guidance to help governments, financial institutions, virtual asset service providers and other regulated entities determine whether a digital ID is appropriate for use for customer due diligence.

03/09/2020

OCC proposes revised rules on corporate activities and transactions

The OCC has announced a proposal to amend its rules relating to policies and procedures for corporate activities and transactions involving national banks and federal savings associations. Specifically, the proposal would update and clarify the policies and procedures, eliminate unnecessary requirements consistent with safety and soundness, and make other technical and conforming changes. The proposed rule has a comment period ending on May 4, 2020.

The proposal would, among other changes:

  • Make the definition of “well managed” consistent for all filing types.
  • Eliminate the filing requirement for FSAs that adopt without change the OCC’s model or optional bylaws.
  • Add numerous provisions to 12 CFR 5.33 permitting national banks and FSAs to elect to follow the procedures applicable to state banks or state savings associations, respectively, for certain business combinations.
  • For operating subsidiaries:
    • Permit an eligible operating subsidiary of a qualifying national bank or FSA to engage in an activity that is substantively the same as a previously approved bank or FSA activity, respectively, by filing a notice with the OCC (national banks) or an application through expedited review (FSAs).
    • Remove the annual national bank operating subsidiary reporting requirement.
  • For non-controlling investments by a national bank and pass-through investments by an FSA:
    • With prior OCC approval, permit investments in enterprises that have not agreed to OCC supervision.
    • Provide an expedited review procedure for these investments under certain conditions.
    • Expand the investments eligible for notice.
    • Permit investments without a filing in enterprises conducting activities limited to those previously reported by the national bank or FSA in a previous non-controlling investment or pass-through investment filing.
  • Provide procedures for granting and revoking citizenship and residency waivers for national bank directors.
  • Permit national banks to request approval for a reduction in capital over more than four quarters.
  • Change the definition of “troubled condition” for purposes of changes in directors and senior executive officers to align with OCC supervisory practices. The updated definition would specify that an enforcement action (a cease-and-desist order, consent order, or formal written agreement) must require the national bank or FSA to improve its financial condition for it to be considered in “troubled condition” solely as a result of the enforcement action.

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