Top Story Compliance Related

The Financial Crimes Enforcement Network (FinCEN) has announced its assessment of a $500,000 civil money penalty against Bethex Federal Credit Union, Bronx, New York, for significant violations of anti-money laundering (AML) regulations. Bethex was liquidated by the NCUA in 2015 as insolvent with no prospects of returning to viability. FinCEN's assessment is a claim against any assets remaining after the completion of the liquidation process. In 2011, Bethex took on a lot of new business with money services businesses without revising its AML program to handle the additional business and the change in customer activity it entailed. As a result, it failed to detect and report significant volumes of suspicious activity, and when it was forced to file late SARs on that activity, the SARs were inadequately completed. For further information, see our Penalty page for this FinCEN action.

The CFPB has released its 2016 Student Banking Report, which raises new concerns about costly fees and risky features that can be attached to certain college-sponsored accounts. The Bureau’s analysis of roughly 500 marketing deals between schools and large banks found that many deals allow for risky features that can lead students to rack up hundreds of dollars in fees per year. The report also examines trends in the school-sponsored credit card market. The CFPB also issued a bulletin reminding colleges and universities they are required to publicly disclose marketing agreements with credit card companies.

FinCEN has announced that it hosted last week the third annual International Supervisors Forum (ISF). The ISF was established in 2013 by similar government regulatory agencies from the United States, Canada, the United Kingdom, Australia, and New Zealand to address issues pertaining to anti-money laundering and countering the financing of terrorism (AML/CFT) and other financial crimes, as well as strengthen domestic and international compliance and supervisory regimes.

The FDIC Board has approved a $2.18 billion operating budget for 2017, down 2.4 percent from 2016 and 46 percent lower than the peak in 2010 at the height of the financial crisis. The Board also approved an authorized staffing level of 6,363 positions for 2017, a 2.6 percent decrease from 2016 and 32 percent lower than the peak in 2011. Chairman Gruenberg said, “This is the seventh consecutive reduction in the FDIC's annual operating budget. These reductions are made possible by continuing steady improvement in the health of the U.S. banking industry. The FDIC remains focused on fulfilling its mission while prudently managing costs."

The OCC has announced the release of a third-party review of its efforts to enhance the agency’s supervision of large and midsize national banks and federal savings associations. The review assessed the OCC’s implementation of recommendations from the 2013 International Peer Review of the agency’s approach to supervising large and midsize institutions. The current assessment and the original 2013 review were conducted by senior regulators from Australia, Canada, and Singapore along with former staff of the International Monetary Fund.

A joint press release from the FDIC and Federal Reserve Board announced that Bank of America, Bank of New York Mellon, JP Morgan Chase, and State Street adequately remediated deficiencies in their 2015 resolution plans. The agencies also announced that Wells Fargo did not adequately remedy all of its deficiencies and will be subject to restrictions on certain activities until the deficiencies are remedied. Resolution plans, required by the Dodd-Frank Act and commonly known as "living wills," must describe the company's strategy for rapid and orderly resolution under bankruptcy in the event of material financial distress or failure of the company.

The U.S. Department of the Treasury has announced action taken to disrupt ISIL’s financial facilitation network by designating as global terrorists the Iraq-based Selselat al Thahab Money Exchange, ISIL financier Fawaz Muhammad Jubayr al-Rawi, and his company, the Hanifa Currency Exchange in Albu Kamal, Syria. Al-Rawi and the two money services businesses have played an important role in ISIL’s financial operations by helping the terrorist group move its funds. As a result of the action, all property and interests in property of Selselat al Thahab, al-Rawi, and the Hanifa Exchange’s branch in Albu Kamal subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them. For additional information see our OFAC Update.

The Department of Housing and Urban Development's Office of the Assistant Secretary for Housing has published a notice in this morning's Federal Register that the Federal Housing Administration (FHA) is shifting the timeframe for FHA's review of loans prior to endorsement from pre-closing to post-closing. A lender applying for unconditional Direct Endorsement authority will therefore submit required loan files, required in accordance with HUD regulations, only after closing. After determining that the mortgage is acceptable and meets all FHA requirements, FHA will notify the lender that the loan has been endorsed. The change will be effective on January 13, 2017.

The National Credit Union Administration has announced that it has issued a cease and desist order to S M Federal Credit Union of Philadelphia, Pennsylvania. Credit union officials have consented to the order, which requires that the credit union:

• Provide credit union records to the compensated auditor;
• Complete a member account verification and supervisory committee audit;
• Reconcile and maintain accurate financial statements and member share and loan records;
• Calculate and track loan delinquency;
• Actively and effectively collect past due loans;
• Cease granting new loans;
• Ensure the supervisory committee is fully staffed and fulfilling all obligations; and
• Provide the agency with monthly financial statements and board and committee minutes.

S M FCU is an associational (faith-based) credit union serving 115 members. Its September 2016 call report shows $56,005 in total assets.

The Board of Governors has announced additional details on how banking entities may seek an extension to conform their investments in a narrow class of funds that qualify as "illiquid funds" to the requirements of section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule. According to the guidelines adopted by the Board, firms seeking an extension should submit information including details about the funds for which an extension is requested, a certification that each fund meets the definition of "illiquid fund," a description of the specific efforts made to divest or conform the illiquid funds, and the length of the requested extension and the plan to divest or conform each illiquid fund within the requested extension period.