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The Federal Reserve Board has issued an invitation for public comment on a proposal to modify its capital plan and stress testing rules for the 2017 cycle. Among other changes, the proposal would tailor the Federal Reserve's Comprehensive Capital Analysis and Review (CCAR). It would remove the qualitative assessment of CCAR for large and noncomplex firms, or bank holding companies and intermediate holding companies of foreign banking organizations with total consolidated assets between $50 billion and $250 billion, on-balance sheet foreign exposure of less than $10 billion, and total consolidated nonbank assets of less than $75 billion. The proposed rule would take effect for the 2017 CCAR. The proposal would reinforce the Federal Reserve's less stringent expectations for these less systemic firms, which are generally engaged in traditional banking activities. The proposed rule would also reduce certain reporting requirements for these firms, which would continue to be subject to the quantitative requirements of CCAR, as well as normal supervision by the Federal Reserve regarding their capital planning. Comments on the proposal are due by November 25, 2016.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated one company and four individuals tied to the Government of North Korea’s proliferation of weapons of mass destruction (WMD). OFAC imposed sanctions on Dandong Hongxiang Industrial Development Company Ltd (DHID) for acting for or on behalf of Korea Kwangson Banking Corporation (KKBC), which was previously designated by the United States and the United Nations for providing financial services in support of WMD proliferators. OFAC also designated Ma Xiaohong, Zhou Jianshu, Hong Jinhua, and Luo Chuanxu for acting for or on behalf of DHID. Any property or interests in property of DHID, Ma Xiaohong, Zhou Jianshu, Hong Jinhua, and Luo Chuanxu in the possession or control of U.S. persons or within the United States are now blocked. Additionally, U.S. persons are generally prohibited from engaging in transactions involving these designated persons.

In a related action, the U.S. Department of Justice unsealed criminal charges against DHID, Ma Xiaohong, Zhou Jianshu, Hong Jinhua, and Luo Chuanxu for conspiring to evade U.S. economic sanctions and violating OFAC’s Weapons of Mass Destruction Proliferators Sanctions Regulations as well as conspiring to launder money instruments. Justice also announced the filing of a civil forfeiture action for all funds contained in 25 bank accounts belonging to DHID and its front companies and a request for a restraining order to be sent to China for all of the funds based upon the allegation of the United States that the funds represent property involved in money laundering.

See "OFAC targets supporters of North Korea's weapons program," in our OFAC Updates, for additional information on these actions.

The Federal Reserve Board has invited public comment on a proposed rule that would strengthen existing requirements and limitations on the physical commodity activities of financial holding companies. The proposal would help reduce the catastrophic, legal, reputational, and financial risks that physical commodity activities pose to financial holding companies. The propose rule would:

• Require firms to hold additional capital in connection with activities involving commodities for which existing laws would impose liability if the commodity were released into the environment;
• Tighten the quantitative limit on the amount of physical commodity trading activity firms may conduct;
• Rescind authorizations that allow firms to engage in physical commodity activities involving power plants;
• Remove copper from the list of precious metals that all bank holding companies are permitted to own and store; and
• Establish new public reporting requirements on the nature and extent of firms' physical commodity holdings and activities.

Comments on the proposed rule will be accepted for 90 days after publication in the Federal Register.

The Treasury Department has announced that OFAC has designated four Mexican nationals, pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act). Eliseo Imperial Castro, a.k.a. “Cheyo Antrax,” Alfonso Lira Sotelo, a.k.a. “El Atlante,” Javier Lira Sotelo, a.k.a “El Hannibal” or “El Carnicero,” and Alma Delia Lira Sotelo have been designated for their narcotics trafficking and money laundering in support or on behalf of the Sinaloa Cartel and/or its high-ranking members. All assets of those designated that are within U.S. jurisdiction or in the control of U.S. persons are frozen, and U.S. persons are generally prohibited from engaging in transactions with them. See "Treasury targets Sinaloa Cartel cell," in our OFAC Updates, for more information.

The CFPB filed a suit in federal court on Thursday against the credit repair company Prime Marketing Holdings, LLC ("Prime"), which allegedly charged consumers a series of illegal advance fees as well as misrepresented the cost and effectiveness of its services. The CFPB is seeking to halt the company’s harmful conduct and to obtain relief for consumers, including refunds of fees paid to the defendant. The Bureau also released a consumer advisory with tips for consumers who are working to improve their credit history or who are dealing with credit repair services.

The Bureau's complaint alleges that Prime violated the Dodd-Frank Act’s prohibition on deceptive acts and practices in the marketing and promotion of its services. The company also allegedly violated the FTC's Telemarketing Sales Rule by charging illegal advance fees and making deceptive statements. The CFPB also alleges that Prime misled consumer about the costs of their services, failed to discuss limits on its "money back guarantee," and misled consumers about the benefits of their services. The Bureau's complaint seeks monetary relief, injunctive relief and penalties.

In an appearance before the House Committee on Financial Services, Treasury Secretary Lew discussed the 2016 annual report of the Financial Stability Oversight Council (FSOC). He noted the Council, which recently released its sixth annual report, convenes regularly to monitor market developments and to take action when needed to protect the American people from potential risks to the financial system. The current report focused on 12 themes that warrant continued attention and, in many cases, further action from the Council members and member agencies:

• cybersecurity;
• risks associated with asset management products and activities;
• capital, liquidity, and resolution;
• central counterparties;
• reforms of wholesale funding markets;
• reforms relating to reference rates;
• data quality, collection, and sharing;
• housing finance reform;
• risk management in an environment of low interest rates and rising asset price volatility;
• changes in financial market structure and implications for financial stability;
• financial innovation and migration of activities; and
• global economic and financial developments.

Lew concluded, “The Council has proven itself as an important forum for the financial regulatory community to come together, identify risks, and work collaboratively to respond to emerging threats to financial stability. It would be a mistake to roll back the clock on these protections or to constrain the ability of the Council or its member agencies to address new risks as they arise, including the Council’s nonbank financial company designations authority.“

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated the PacNet Group (“PacNet”) as a significant transnational criminal organization (TCO) pursuant to Executive Order (E.O.) 13581, “Blocking Property of Transnational Criminal Organizations.” PacNet, an international payments processor and money services business, has a lengthy history of money laundering by knowingly processing payments on behalf of a wide range of mail fraud schemes that target victims in the United States and throughout the world.

As part of this action, OFAC also designated a global network of 12 individuals and 24 entities across 18 countries. Specifically, these individuals and entities were targeted for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of, PacNet, or for being owned or controlled by other persons being designated as part of this action. As a result of OFAC's action, all property and interests in property of the designated individuals and entities that are subject to U.S. jurisdiction are blocked, and U.S. persons are prohibited from engaging in transactions with them.

For additional information, see "PacNet designated as transnational criminal organization," in our OFAC Updates.

The Consumer Financial Protection Bureau has reported it has filed a Notice of Charges against five title lenders operating in Arizona — Auto Cash Leasing, LLC; Interstate Lending, LLC; Oasis Title Loans, LLC; Phoenix Title Loans, LLC; and Presto Auto Loans, Inc. — for failing to disclose the annual percentage rate in online advertisements about title loans. The Bureau alleges that the companies advertised a periodic interest rate for their loans without listing the corresponding annual percentage rate. A Notice of Charges initiates proceedings in an administrative forum, and is similar to a complaint filed in federal court. The case will be tried by an Administrative Law Judge from the Bureau’s Office of Administrative Adjudication, an independent office within the Bureau.

HUD has announced the publication of a final rule, "Equal Access in Accordance With an Individual's Gender Identity in Community Planning and Development Programs," to ensure that all individuals have equal access to many of the Department’s core shelter programs in accordance with their gender identity. The new rule will require a recipient, subrecipient, or provider to establish, amend, or maintain program admissions, occupancy, and operating policies and procedures (including policies and procedures to protect individuals' privacy and security), so that equal access is provided to individuals based on their gender identity. This requirement includes tenant selection and admission preferences.

The Financial Action Task Force (FATF) has announced the opening of the its Training and Research Institute (TREIN). Through the institute’s facilities, government officials from all member countries of the FATF Global Network will have access to a comprehensive training and research program. Low capacity countries or countries with a less mature AML/CFT regime, will be able to benefit greatly from this additional expertise and research.