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Top Story Compliance Related

01/04/2024

SEC charges real estate developer with $93M fraud scheme

Yesterday, the Securities and Exchange Commission announced that it obtained an asset freeze and other emergency relief concerning an alleged $93 million real estate investment fraud perpetrated by Miami-based developer Rishi Kapoor. The SEC also charged Location Ventures LLC, Urbin LLC, and 20 other related entities in connection with the fraud scheme.

According to the SEC’s complaint, from approximately January 2018, until at least March 2023, Kapoor and certain of the defendant entities solicited investors by, among other things, making several material misrepresentations and omissions regarding Kapoor, Location Ventures, Urbin, and their real estate developments. The false statements allegedly included misrepresenting Kapoor’s compensation; his cash contribution to the capitalization of Location Ventures; the corporate governance of Location Ventures and Urbin; the use of investor funds; and Kapoor’s background. The SEC’s investigation uncovered that Kapoor allegedly misappropriated at least $4.3 million of investor funds and improperly commingled approximately $60 million of investor capital between Location Ventures, Urbin, and some of the other charged entities. The complaint also alleges that Kapoor caused some entities to pay excessive fees and to represent higher returns to investors by significantly understating cost estimates.

The complaint charges Kapoor, Location Ventures, Urbin, and the 20 related entities with violating provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC seeks permanent injunctions, civil monetary penalties, an officer-and-director bar against Kapoor, and disgorgement of ill-gotten gains with prejudgment interest against Kapoor and certain of the charged entities.

01/03/2024

CFPB amicus brief in debt collection suit

The CFPB yesterday posted a Bureau Blog article on "Holding debt collectors responsible for false statements," to announce that the Bureau has filed an amicus brief in the U.S. Court of Appeals for the First Circuit to help ensure consumers can hold debt collectors responsible when they make false representations.

In this case — Carrasquillo v. CICA Collection Agency — an individual filed for bankruptcy, so collection efforts against the person should generally have stopped. However, a debt collector still sent the person a letter to collect on the debt and said that the consumer could be sued if they didn’t pay it. Because of the bankruptcy rules, that statement was false—the consumer couldn’t actually be sued. The individual sued to hold the debt collector accountable for the misrepresentation, but the debt collector pleaded ignorance. The debt collector claimed that they were only responsible under the law when they intended to say something false.

As the CFPB’s amicus brief explains, a debt collector can be liable under the Fair Debt Collection Practices Act even if they claim that they did not know that their statement was false. A debt collector will not be held responsible in a lawsuit brought by an individual if they can show that they didn’t intend to make the false representation and that they had effective procedures in place designed to prevent the mistake. But debt collectors cannot just stick their heads in the sand and claim ignorance. This interpretation has been upheld by numerous courts, and it is what Congress clearly intended. The brief also explains that consumers generally do not lose the law’s important protections when they file for bankruptcy.

01/03/2024

OCC releases December CRA evaluation ratings

The OCC has released CRA evaluations for 25 OCC-supervised institutions whose evaluations became public in December 2023.

Of the evaluations listed, 18 are rated satisfactory, and the following seven are rated outstanding:

01/02/2024

FinCEN opens BOI registry

FinCEN yesterday announced it has begun to accept Beneficial Ownership Information reports. Existing reporting companies have until January 1, 2025, to register. Reporting companies newly created or registered in 2024 have 90 days after receiving actual or public notice that their company's creation or registration is effective.

01/02/2024

FDIC November enforcement actions

The FDIC has released a list of enforcement actions it took in November 2023.

  • Horicon Bank, Horicon, Wisconsin, was assessed a $23,000 civil money penalty for engaging in a pattern or practice of violations of the Flood Disaster Protect Act and FDIC regulations.
  • Removal and Prohibition Orders were issued against:
    • Sheree Leanne Carter, formerly a teller at Rockland Trust Company, Rockland, Massachusetts, after the FDIC found, and Carter neither admitted nor denied that over a span of 16 years she stole funds from the bank by taking cash from her teller drawer and cash intended for the bank's ATMs. manipulated the bank's systems and records to create fictitious transactions before audits and to cancel those transactions after the audits were completed, to avoid detection and conceal her embezzlement for personal gain of approximately $430,000.
    • Lladira Hernandez, formerly a client success representative at Central Valley Community Bank, Fresco, California, after the FDIC determined, and Hernandez neither admitted nor denied that, between May and August 2022, she initiated unauthorized ACH debits from four separate customers; and also fraudulently created an online banking profile for a customer, linked her own accounts to it and, after
      resigning from the bank, initiated unauthorized transfers.
    • William J. Burnell, formerly the chief credit officer of NBC Bank, New Orleans, Louisiana, after the FDIC determined, and he neither admitted nor denied, that during 2015 and 2016 he approved loans to borrowers that he knew were not creditworthy. An earlier Order for Assessment of a Civil Money Penalty against him was terminated.
  • Cease and Desist Consent Orders were issued to Peoples Bank, Munster, Indiana; Commenity Servicing, LLC, Columbus, Ohio; First Fed Bank, Port Angeles, Washington; Liberty Bank, Inc., Salt Lake City, Utah, and; Brighton Bank, Brighton, Tennessee.

12/29/2023

Network financing Houthi attacks on shipping sanctioned

OFAC has designated one individual and three entities responsible for facilitating the flow of Iranian financial assistance to Houthi forces and their destabilizing activities. Among those designated are the head of the Currency Exchangers Association in Sana’a, and three exchange houses in Yemen and Türkiye. These persons have facilitated the transfer of millions of dollars to the Houthis at the direction of U.S.-designated Sa’id al-Jamal, who is affiliated with Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF).

For the names and identification information of the designated parties, see the December 28, 2023, BankersOnline OFAC Update.

12/28/2023

FTC sues Grand Canyon University

The Federal Trade Commission has announced it has filed suit against Grand Canyon Education, Inc. (GCE), Grand Canyon University (GCU), and Brian Mueller—the CEO of GCE and president of GCU—for deceiving prospective doctoral students about the cost and course requirements of its doctoral programs and about being a nonprofit, while also engaging in deceptive and abusive telemarketing practices.

In its complaint, the FTC says that GCU and GCE told prospective students that the total cost of GCU’s “accelerated” doctoral programs was equal to the cost of just 20 courses (or 60 credits). In reality, the school requires that almost all doctoral students take additional “continuation courses” that add thousands of dollars in costs. The U.S. Department of Education reported that fewer than 2% of GCU doctoral program graduates completed their program within the cost that GCU advertises, and almost 78% of these students take five or more continuation courses. The complaint also says that, despite operating the school for the profit of GCE and its investors, the defendants deceptively marketed the school as a nonprofit.

The defendants also used abusive telemarketing calls to try to boost enrollment at GCU, according to the complaint. GCE advertised on websites and social media urging prospective students to submit their contact information on digital forms. GCE telemarketers then used the information to illegally contact people who have specifically requested not to be called, as well as people on the National Do Not Call Registry. GCE has also made illegal calls to numbers it purchased from lead generators.

The FTC says the defendants’ deceptive claims and abusive telemarketing calls violated the FTC Act and the Telemarketing Sales Rule and asks the court to provide redress to consumers and prohibit the institution from further violations of the law.

12/27/2023

FTC extends comment period on proposed ban on junk fees

The Federal Trade Commission has announced it will extend by 30 days the comment period on its proposed rule prohibiting junk fees. Comments will now be accepted through February 7, 2024.

12/27/2023

OCC revises its small and intermediate small CRA asset thresholds

On Tuesday, the OCC issued Bulletin 2023-40 announcing revisions to the asset-size threshold amounts used to define “small bank or savings association” and “intermediate small bank or savings association” under the Community Reinvestment Act (CRA) regulations. The thresholds—which apply to any national bank, federal savings association, or state savings association (collectively, bank)—become effective January 1, 2024. This bulletin adjusts the threshold amounts based on the annual percentage change in a measure of the Consumer Price Index.

The threshold amounts are the same as those announced last week by the FDIC and Federal Reserve System—Beginning January 1, 2024, a bank that, as of December 31 of either of the prior two calendar years, had assets of less than $1.564 billion is a “small bank or savings association.” A “small bank or savings association” with assets of at least $391 million as of December 31 of both of the prior two calendar years and less than $1.564 billion as of December 31 of either of the prior two calendar years is an “intermediate small bank or savings association.”

12/27/2023

FDIC releases public resolution plans for 9 large banks

On Tuesday, the FDIC released the public sections of resolution plans of nine large domestic covered insured depository institutions (IDIs) that were due by December 1, 2023.

FDIC regulations require a covered insured depository institution to submit a resolution plan under which the FDIC, as receiver, might resolve the institution under the Federal Deposit Insurance Act in a way that provides depositors timely access to their insured deposits, maximizes returns on the sale or disposition of assets, and minimizes creditor losses.

The nine IDIs include (with links to the public portion of their plans):

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