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Top Story Compliance Related

07/29/2021

OFAC sanctions Syrian regime prisons, officials and armed group

On Wednesday, The Treasury Department announced that OFAC had sanctioned eight Syrian prisons run by the Assad regime’s intelligence apparatus that have been sites of human rights abuses against political prisoners and other detainees. OFAC also designated five senior security officials of regime entities that control these detention facilities.

OFAC also sanctioned Syrian armed group Ahrar al-Sharqiya, which operates in northern Syria, and two of the group's leaders, for abuses against civilians.

For identification information on the designated individuals and entities, see our BankersOnline OFAC Update for July 28, 2021.

07/27/2021

Bureau advisory on SCRA rights

The CFPB has posted a Consumer Advisory, "Know Your Rights Under the Servicemember Civil Relief Act (SCRA)," with an explanation of the protections afforded servicemembers under the Act. The Advisory notes that the SCRA was amended this year to allow qualified individuals the ability to terminate residential and vehicle lease agreements electronically by sending a notice of termination along with a copy of their orders – or a letter from their commanding officer via email or through a communications portal designated by the lender or agent.

The Advisory advises servicemembers to check with a military legal assistance attorney or private legal counsel before signing any waiver of SCRA rights, and suggests options available to servicemembers who believe their SCRA rights have been violated. There are also links to several resources that can help servicemembers better understand the full range of legal protections available under the SCRA.

07/26/2021

Weather damage relief for areas of Michigan

FDIC FIL-52-2021, issued Friday, announced steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Michigan affected by severe storms, flooding, and tornadoes June 25–26, 2021. The FDIC is encouraging banks to work constructively with borrowers experiencing difficulties beyond their control because of damage caused by the severe weather. Banks that extend repayment terms, restructure existing loans, or ease terms for new loans in a manner consistent with sound banking practices can contribute to the health of the local community and serve the long-term interests of the lending institution. Banks may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.

07/26/2021

Payoneer settles with OFAC

OFAC has announced a settlement with Payoneer Inc., a publicly traded New York-based online money transmitter and provider of prepaid access. Payoneer agreed to remit $1,400,301.40 to settle its potential civil liability for 2,260 apparent violations of multiple sanctions programs. Payoneer processed payments for parties located in the Crimea region of Ukraine, Iran, Sudan, and Syria, and also processed payments on behalf of sanctioned persons on OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”).

According to OFAC's Enforcement Release, Payoneer’s sanctions compliance program deficiencies at the relevant times—including with respect to screening, testing, auditing, and transaction review procedures—enabled persons in these jurisdictions and regions and on the SDN List to engage in approximately $802,117.36 worth of transactions. The settlement amount reflects OFAC’s determination that 2,241 of Payoneer’s apparent violations were not voluntarily self-disclosed, 19 were voluntarily self-disclosed, and all transactions were non-egregious.

07/23/2021

OFAC sanctions Cuban defense minister and special forces unit

Yesterday, OFAC sanctioned one Cuban individual and one Cuban entity, targeting the Cuban Minister of Defense, Alvaro Lopez Miera, and the Brigada Especial Nacional del Ministerio del Interior of the Cuban Ministry of the Interior in connection with the repression of peaceful, pro-democratic protests in Cuba that began on July 11.

For identification information, see BankersOnline's July 22, 2021, OFAC Update.

07/22/2021

Tandy Leather and former CEO settle SEC charges

The Securities and Exchange Commission has announced that Fort Worth, Texas, specialty retailer Tandy Leather Factory Inc. and its former chief executive officer, Shannon Greene, have agreed to settle charges for accounting, reporting, and control failures that led to a multi-year restatement of the company’s financial statements.

According to the order filed by the SEC, Tandy’s inventory tracking system was incapable of supporting its disclosed inventory accounting methodology because it did not properly maintain historical cost information for its inventory. Data from this system populated Tandy’s financial statements with inaccurate financial information, which in turn impacted the company’s calculations for, among other things, inventory, net income, and gross profit for years. Greene and others at the company were aware of the inventory tracking system’s limitations, but did not adequately remedy them, and failed to design and maintain proper accounting controls to reasonably ensure that Tandy’s transactions were recorded in accordance with generally accepted accounting principles. Tandy also failed to properly design, maintain, and evaluate its disclosure controls and procedures (DCP) and internal control over financial reporting (ICFR), and Greene failed to properly assess and evaluate the effectiveness of the same. As a result, Greene inaccurately certified that Tandy’s DCP and ICFR were properly designed and effective. On June 22, 2021, Tandy issued restated financial statements for fiscal years 2017 and 2018, each quarter in fiscal year 2018, and the first quarter of fiscal year 2019.

Without admitting or denying the order’s findings, Tandy and Greene each consented to cease and desist from further committing or causing these violations and pay civil money penalties of $200,000 and $25,000, respectively. In accepting Tandy’s settlement offer, the SEC took into account remedial actions the company took promptly after learning of the issues detailed in the SEC’s order.

07/22/2021

FTC amends rules of practice

The Federal Trade Commission has published a final rule [86 FR 38542] amending its rules of practice in 16 CFR parts 0 and 1. The revised rules, effective today, modernize procedures for rulemakings to define unfair or deceptive acts or practices under the FTC Act to provide for more efficient conduct of rulemaking proceedings. The Commission is also revising these rules to better reflect the agency's organizational structure and authority.

The Commission is also making conforming edits to make the rule language more gender-neutral; use active voice instead of passive voice; replace ambiguous uses of “shall” with “may”, “will”, or “must” as appropriate; make nonsubstantive grammatical changes; and add and standardize citations to the U.S. Code where appropriate.

07/21/2021

Agencies to act jointly on CRA rules modernization

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency on Tuesday issued an interagency statement on Community Reinvestment Act (CRA) Joint Agency Action. The agencies said they are "committed to working together to jointly strengthen and modernize regulations implementing" the CRA. "Joint agency action will best achieve a consistent, modernized framework across all banks to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighborhoods."

The OCC announced it will propose rescinding the Community Reinvestment Act (CRA) rule issued in May 2020 and is committed to working with the Federal Reserve Board and the FDIC to put forward a joint rulemaking that strengthens and modernizes the CRA. The decision to propose rescinding the 2020 rule follows the completion of a review initiated by Acting Comptroller of the Currency Michael Hsu shortly after he took office.

07/21/2021

OFAC issues Venezuela-related license

OFAC has issued a Venezuela-related General License and updated a related FAQ. See the July 20, 2021, BankersOnline OFAC Update for details.

07/20/2021

SEC orders $8.1M returned to investors

The Securities and Exchange Commission yesterday filed a settled action against UBS Financial Services Inc. for compliance failures relating to sales of a volatility linked exchange-traded product (ETP). The Order filed by the SEC indicates the ETP at issue is designed to track short-term volatility expectations in the market as measured against derivatives of a volatility index. According to the order, the issuer of the product warned UBS that it was not appropriate to hold the product for extended periods, and the product’s offering documents made clear that the product was more likely to decline in value when held over a longer period.

The SEC order finds that UBS:

  • prohibited brokerage representatives from soliciting sales of the product and placed other restrictions on sales of the product to brokerage customers, but did not place similar restrictions on certain financial advisers’ use of the product in discretionary managed client accounts
  • adopted a concentration limit on volatility-linked ETPs, but failed to implement a system for monitoring and enforcing that limit for five years
  • prohibited the financial advisers from making additional recommendations of this ETP prior to being contacted by the Commission staff

The order also finds that between January 2016 and January 2018, certain financial advisers:

  • had a flawed understanding of the appropriate use of the volatility-linked ETP
  • failed to take sufficient steps to understand risks associated with holding the product for extended periods
  • purchased and held the product in client accounts for lengthy periods, including hundreds of accounts that held the product for over a year, resulting in meaningful losses

Without admitting or denying the SEC’s findings, UBS agreed to cease and desist from violations of Rule 206(4)-7 of the Investment Advisers Act of 1940, a censure, and disgorgement and prejudgment interest of $112,274 and a civil penalty of $8 million, which will be distributed to investors harmed by the conduct at issue.

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