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Top Story Compliance Related

03/17/2020

Fed revises internal appeals and ombudsman policies

The Board of Governors of the Federal Reserve System has published [85 FR 15175] a final policy revising its internal appeals process for institutions wishing to appeal an adverse material supervisory determination and its policy regarding the Ombudsman for the Federal Reserve System. The final appeals process will apply to all material supervisory determination appeals initiated after the effective date, which is April 1, 2020.

03/17/2020

FinCEN urges communication of concerns related to COVID-19

FinCEN has released a notice encouraging financial institutions to communicate COVID-19-related concerns and to stay alert to related illicit activity, similar to fraudulent transactions that occur in the wake of natural disasters. FinCEN is monitoring public reports and BSA reports of suspect behavior connected to COVID-19, and has noted some emerging trends:

  • Imposter Scams – Bad actors attempt to solicit donations, steal personal information, or distribute malware by impersonating government agencies (e.g., Centers for Disease Control and Prevention), international organizations (e.g., World Health Organization), or healthcare organizations.
  • Investment Scams – The SEC urged investors to be wary of COVID-19-related investment scams, such as promotions that falsely claim that the products or services of publicly traded companies can prevent, detect, or cure coronavirus.
  • Product Scams – The FTC and FDA have issued public statements and warning letters to companies selling unapproved or misbranded products that make false health claims pertaining to COVID-19. Additionally, FinCEN has received reports regarding fraudulent marketing of COVID-19-related supplies, such as certain facemasks.
  • Insider Trading – FinCEN has received reports regarding suspected COVID-19-related insider trading.

FinCEN reminded institutions of its Advisory, FIN-2017-A007, "Advisory to Financial Institutions Regarding Disaster-Related Fraud" (October 31, 2017), for descriptions of other relevant typologies, such as benefits fraud, charities fraud, and cyber-related fraud.

For suspected suspicious transactions linked to COVID-19, along with checking the appropriate suspicious activity report-template (SAR-template) box(es) for certain typologies, FinCEN also encourages financial institutions to enter “COVID19” in Field 2 of the SAR template.

03/13/2020

OCC revises Deposit-Related Credit booklet

OCC Bulletin 2020-14, issued yesterday, announces a full revision of the "Deposit Related Credit" booklet of the Comptroller's Handbook, which is prepared for use by OCC examiners in connection with the examination and supervision of national banks, federal savings associations, and federal branches and agencies of foreign banking organizations.

Version 3.0 of the booklet replaces the booklet of the same title and rescinds OCC Bulletin 2018-28, “Deposit-Related Credit: Updated Comptroller’s Handbook Booklet,” which transmitted version 2.1 of the booklet in September 2018. The newest version:

  • reflects relevant OCC issuances published since this booklet was last issued
  • reflects changes to laws and regulations that occurred since this booklet was last issued
  • clarifies applicability of references to covered savings associations
  • includes clarifying edits regarding supervisory guidance, sound risk management practices, or legal language
  • revises certain content for general clarity

03/13/2020

Regulators statement following Tennessee tornadoes

The OCC, Federal Reserve, FDIC, NCUA and the Tennessee Department of Financial Institutions have issued a joint press release stating they recognize the serious impact of tornadoes in Tennessee on the customers and operations of many financial institutions and will provide appropriate regulatory assistance to affected institutions subject to their supervision. The agencies encourage institutions operating in the affected areas to meet the financial services needs of their communities. A complete list of affected disaster areas can be found at http://www.fema.gov/.

The release offers information on:

  • Lending
  • Use of temporary facilities
  • Publishing requirements relating to branch closings, relocations and temporary facilities
  • Regulatory reporting requirements
  • Community Reinvestment Act consideration for financial institutions' actions
  • Investments

The FDIC has also issued FIL-16-2020 with steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Tennessee affected by severe storms, tornadoes, straight-line winds and flooding.

03/13/2020

Another Russian oil broker targeted

OFAC has announced the designation of TNK Trading International S.A. (TTI) for operating in the oil sector of the Venezuelan economy.

TTI, incorporated in Switzerland, is a subsidiary of Russian state-controlled Rosneft Oil Company. Following the February 18, 2020, Treasury designation of Rosneft Trading S.A. (RTSA), cargoes of Venezuelan oil allocated to RTSA were changed to TTI in order to evade U.S. sanctions.

Identification information can be found in BankersOnline's OFAC Update.

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.

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