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Top Story Compliance Related


Webinar: Money Laundering from Environmental Crime

The FATF has announced it will conduct a webinar on Money Laundering from Environmental Crime on September 30, 2021 from 1:00–2:00 p.m. CEST [7:00–8:00 a.m. EDT]. An international panel will discuss important aspects of the FATF Report on the topic, including how to identify red-flag information to help detect and trace the illicit finances of criminals engaged in environmental crimes. Participants will also debate how to overcome challenges, such as the lack of governmental or institutional prioritization, limited awareness and data, de-risking, and limited domestic and international co-ordination. Online registration is open.


First Regulation Crowdfunding case filed by SEC

The SEC yesterday filed a complaint charging three individuals and one issuer with conducting a fraudulent scheme to sell nearly $2 million of unregistered securities through two crowdfunding offerings. The SEC also charged the registered funding portal and its CEO, who placed the offerings on the portal’s platform.

According to the SEC's complaint, Robert Shumake, with his associates Nicole Birch and Willard Jackson, conducted fraudulent and unregistered crowdfunding offerings through two cannabis and hemp companies, Transatlantic Real Estate LLC and 420 Real Estate LLC. Shumake, with assistance from Birch and Jackson, allegedly hid his involvement in the offerings from the public out of concern that his prior criminal conviction could deter prospective investors.

The complaint alleges that Shumake and Birch raised $1,020,100 from retail investors through Transatlantic Real Estate, and Shumake and Jackson raised $888,180 through 420 Real Estate. Shumake, Birch, and Jackson allegedly diverted investor funds for personal use rather than using the funds for the purposes disclosed to investors.

TruCrowd Inc., a registered funding portal, and its CEO, Vincent Petrescu, allegedly hosted the Transatlantic Real Estate and 420 Real Estate offerings on TruCrowd's platform. Petrescu allegedly failed to address red flags including Shumake's criminal history and involvement in the crowdfunding offerings, and otherwise failed to reduce the risk of fraud to investors.

The SEC's Office of Investor Education and Advocacy has issued an investor bulletin on crowdfunding and investor alerts on the red flags of investment fraud. Additional information is available at


Bureau sues software company

The CFPB yesterday announced it had filed a lawsuit in federal district court accusing a California-based software company and its owner of providing assistance to illegal credit-repair businesses. The CFPB alleges that Credit Repair Cloud and CEO Daniel Rosen have violated the FTC's Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act of 2010 (CFPA) by providing substantial assistance or support to credit-repair businesses that use telemarketing and charge unlawful advance fees to consumers. The CFPB’s lawsuit seeks relief for harmed consumers from the defendants, disgorgement of their unjust gains, an injunction to stop their illegal conduct, and civil penalties.

Credit Repair Cloud is a California-based corporation founded by Rosen. According to the CFPB, since 2013, Credit Repair Cloud has sold software and other tools to help others start and operate credit-repair businesses. A credit-repair business provides consumers with goods or services that purport to remove derogatory information from credit reports or otherwise improve a person's credit history, credit record, or credit rating. Such companies that use telemarketing are covered by the TSR, and may not request or receive fees from a consumer until the company has provided that consumer with a credit report that shows the promised results and that was issued more than six months after such results were achieved.

The CFPB’s complaint alleges that Rosen and Credit Repair Cloud are providing substantial assistance to credit-repair companies that use telemarketing to reach consumers and charge unlawful advance fees under the TSR. Specifically, the CFPB alleges that Rosen and Credit Repair Cloud have encouraged the credit-repair businesses that use their services – including trainings, materials, and software -- to charge unlawful advance fees and Rosen and Credit Repair Cloud knew or consciously avoided knowing that these customers were charging advance fees in violation of the TSR.


Former IT manager charged in $8M insider scheme

The Securities and Exchange Commission has announced insider trading charges against Dayakar R. Mallu, of Orlando, Florida, who generated gains and avoided losses totaling over $8 million by trading in the securities of his former employer, Mylan N.V., ahead of four public announcements between October 3, 2017, and July 29, 2019.

The SEC’s complaint alleges that Mallu received material nonpublic information about Mylan's unannounced earnings, drug approvals by the U.S. Food and Drug Administration, and impending merger with a division of Pfizer Inc. from his friend, a Mylan insider. The complaint alleges that Mallu traded on that information, and shared a portion of his trading profits with the Mylan insider by making cash payments in India.


Expanded tax benefits for charitable donations explained

The IRS has issued an explanation of how expanded tax benefits can help both individuals and businesses give to charity before the end of this year.

The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, provides several provisions to help individuals and businesses who give to charity. The new law generally extends through the end of 2021 four temporary tax changes originally enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The changes include:

  • Deduction for individuals who don't itemize; cash donations up to $600 qualify
  • 100% limit on eligible cash contributions made by itemizers in 2021
  • Corporate limit increased to 25% of taxable income
  • Increased limits on amounts deductible by businesses for certain donated food inventory


    Missouri apartment owners charged with discrimination

    HUD has announced it has charged Daniel J. Felder and Andrea Williams, as co-guardians and conservators of the Felder Peter King Estate of Ward Protectee, the Estate, and Eric Felder, the owners and property manager of duplex and triplex apartments in St. Charles, Missouri, with housing discrimination for allegedly refusing to rent an apartment to a prospective tenant because he has two children.


    New Ethiopian-related Executive Order and OFAC activity

    President Biden has signed Executive Order 14046, “Imposing Sanctions on Certain Persons with Respect to the Humanitarian and Human Rights Crisis in Ethiopia.” The E.O. declares a national emergency with respect to the crisis and provides the Secretary of the Treasury, in consultation with the Secretary of State, with authorities to impose a range of targeted sanctions on persons determined, among other things, to be responsible for or complicit in actions or policies that expand or extend the ongoing crisis or obstruct a ceasefire or peace process in northern Ethiopia or commit serious human rights abuse.

    Concurrent with the issuance of the new E.O., Treasury issued three general licenses, which authorize official activities of certain international organizations and other international entities, certain transactions in support of nongovernmental organizations’ (NGOs) activities, and certain transactions related to the exportation or reexportation of agricultural commodities, food, medicine, and medical items. Treasury also issued a series of six FAQs to provide additional clarity and guidance regarding the non-application of OFAC’s 50 Percent Rule to the property and interests in property of persons blocked pursuant to this E.O., as well as additional information on the activities authorized by the new Ethiopia General Licenses.

    The Department of the Treasury also announced that OFAC has designated members of a network of Lebanon- and Kuwait-based financial conduits that fund Hizballah. OFAC also designated members of an international network of financial facilitators and front companies that operate in support of Hizballah and Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF).

    For links to the Ethiopia-related Executive Order and the related General Licenses and FAQs, and identification information on the designated Hizballah supporters, see BankersOnline's OFAC Update.

    UPDATE 9/21/2021: This story has been updated to include the Executive Order number and a link to its publication in the Federal Register.


    FinCEN SAR guidance regarding child exploitation

    FinCEN has issued Notice FIN-2021-NTC3 to call attention to an increase in online child sexual exploitation (OCSE). The Notice provides financial institutions with specific suspicious activity report (SAR) filing instructions, and highlights some financial trends related to OCSE.

    The Notice requests the use of specific terms and definitions when describing suspicious activity involving OCSE.


    OCC lists enforcement actions

    The OCC has released a list of recent enforcement actions against OCC-regulated institutions and individuals affiliated with such institutions.

    Included were previously announced civil money penalties against Cadence Bank, N.A. (Atlanta, GA) and Wells Fargo Bank, N.A. (Sioux Falls, SD). Also included were:

    • a $40,500 civil money penalty order against Washington Federal Bank, N.A. (Seattle, WA) for a pattern or practice of violations of the Flood Disaster Protection Act
    • a Formal Agreement with Anna-Jonesboro National Bank (Anna, IL)
    • a Removal/Prohibition order against Tracy Rethwisch, a former customer service representative for American National Bank of Minnesota (Baxter, MN), after an OCC finding that she misappropriated approximately $14,450 in cash from her teller drawer.


    School District charged by SEC

    The SEC has charged a San Diego County school district, Sweetwater Union High School District, and its former Chief Financial Officer, Karen Michel, with misleading investors who purchased $28 million in municipal bonds.

    According to the SEC's complaint against Michel and its order against Sweetwater, in April 2018, Sweetwater and Michel provided investors with misleading budget projections that indicated the district could cover its costs and would end the fiscal year with a general fund balance of approximately $19.5 million, when in reality the district was engaged in significant deficit spending and on track to a negative $7.2 million ending fund balance. The order finds that Michel managed the bond offering for the district and was aware of reports showing that the projections were untenable and contradicted by known actual expenses. Nevertheless, as stated in the order, Sweetwater and Michel included the projections in the April 2018 bonds' offering documents and also provided them to a credit rating agency that rated the district, while omitting that the projections were contradicted by internal reports and did not account for actual expenses. Additionally, the complaint alleges that Michel signed multiple certifications falsely attesting to the accuracy and completeness of the information included in the offering documents.


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