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Top Story Compliance Related


OFAC targets corruption networks linked to TNOs

On Wednesday, Treasury reported that OFAC had targeted 16 individuals and 24 entities across several countries in Europe and the Western Hemisphere. The actions were taken under the authority of Executive Order 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act, and targets perpetrators of corruption and serious human rights abuse. The designations targeted the nexus between public corruption and organized crime.

For the names and identification information of the individuals and entities added to OFAC's SDN List, see the December 8, 2021, BankersOnline OFAC Update.


Treasury targets repression and undermining of democracy

Treasury announced on Tuesday that OFAC has designated 15 actors across three countries in connection with serious human rights abuse and repressive acts targeting innocent civilians, political opponents, and peaceful protestors. In addition, OFAC designated two entities and two individuals that the Department of State has identified as responsible for certain gross violations of human rights in Iran.

For identity information on the individuals and entities designated, see the December 7, 2021, BankersOnline OFAC Update.


FinCEN proposes Beneficial Ownership Reporting Rule

FinCEN has announced it has published a Notice of Proposed Rulemaking to implement the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA). The proposed rule is designed to protect the U.S. financial system from illicit use and impede malign actors from abusing legal entities, like shell companies, to conceal proceeds of corrupt and criminal acts. Such abuses undermine U.S. national security, economic fairness, and the integrity of the U.S. financial system.

The proposed rule addresses, among other things, who must report beneficial ownership information, when they must report, and what information they must provide. Collecting this information and providing access to law enforcement, financial institutions, and other authorized users will diminish the ability of malign actors to hide, move, and enjoy the proceeds of illicit activities. The proposed rule also reflects stated concerns in the newly released U.S. Government Strategy on Countering Corruption, which addresses the money laundering risks posed by anonymous shell companies as well as the need to protect the international financial system from abuse by corrupt and other illicit actors. It is also consistent with the efforts of the Financial Action Task Force and G7 and G20 leaders to curtail the ability of illicit actors to hide wealth behind anonymous shell companies.

FinCEN will engage in additional rulemakings to (1) establish rules for who may access BOI, for what purposes, and what safeguards will be required to ensure that the information is secured and protected; and (2) revise FinCEN’s customer due diligence rule following the promulgation of the BOI reporting final rule. In addition, FinCEN is developing the infrastructure to administer these requirements, such as the beneficial ownership information technology system.

The proposal was published on December 8, 2021, in the Federal Register, with comments due by February 7, 2022.


Bureau issues final rule Facilitating the LIBOR Transition

The CFPB has published in today's Federal Register a Final Rule and official interpretations amending Regulation Z, generally to address the anticipated sunset of LIBOR, which is expected to be discontinued for most U.S. Dollar (USD) tenors in June 2023.

The Bureau is amending the open-end and closed-end provisions to provide examples of replacement indices for LIBOR indices that meet certain Regulation Z standards. The Bureau also is amending Regulation Z to permit creditors for home equity lines of credit (HELOCs) and card issuers for credit card accounts to transition existing accounts that use a LIBOR index to a replacement index on or after April 1, 2022, if certain conditions are met.

The final rule also addresses change-in-terms notice provisions for HELOCs and credit card accounts and how they apply to accounts transitioning away from using a LIBOR index. In addition, the Bureau is amending Regulation Z to address how the rate reevaluation provisions applicable to credit card accounts apply to the transition from using a LIBOR index to a replacement index.

The Bureau is reserving judgment about whether to include references to a 1-year USD LIBOR index and its replacement index in various comments; the Bureau will consider whether to finalize comments proposed on that issue in a supplemental final rule once it obtains additional information.

The final rule effective and mandatory compliance date is generally effective April 1, 2022; changes to two sample forms in Appendix H will be effective October 1, 2023. The mandatory compliance date for two open-end change-in-terms notice requirements is October 1, 2022.

The Bureau also update its LIBOR Transitions FAQs to reflect the new final rule.

Editor's Note: BankersOnline's Regulation Z pages, except for those in Appendix H, have been updated with the final rule.


FDIC Office of Supervisory Appeals opens

The FDIC’s new Office of Supervisory Appeals became fully operational yesterday and will begin to consider and decide appeals of material supervisory determinations. The new Office will enhance the independence of the FDIC’s supervisory appeals process and further the FDIC’s goal of ensuring consistency and accountability in the examination process.

The FDIC's Guidelines for Appeals of Material Supervisory Determinations also took effect yesterday.


OCC report on effects of COVID-19 and risks

The OCC has issued a report on the key issues facing the federal banking system and the effects of the COVID-19 pandemic on the federal banking industry in its Semiannual Risk Perspective for Fall 2021.

Banks are weathering the COVID-19 crisis with resilience and satisfactory credit quality and strong earnings, but weak loan demand and low net interest margins continue to weigh on performance. The OCC highlighted operational, credit, compliance, and strategic risks, among the key risk themes in the report.

Highlights from the report include:

  • Operational risk is elevated as banks respond to an evolving and increasingly complex operating environment and cyber risks.
  • Credit risk is moderate as widespread government programs and appropriate risk management limited the potential credit impact, though some areas warrant continued attention.
  • Compliance risk is heightened, driven by regulatory changes and policy initiatives that continue to challenge risk management.
  • Strategic actions taken by banks to offset earnings impacts of low yields and net interest margin compression remain a risk.

The report also highlights an OCC initiative to act on the risk that climate change presents to the federal banking system.


OFAC targets corruption in Democratic Republic of the Congo

On Monday, the Department of the Treasury announced that OFAC has sanctioned one individual, Alain Mukonda, for providing support to previously sanctioned billionaire Dan Gertler, as well as 12 entities linked to Mukonda or companies associated with him in the Democratic Republic of the Congo and Gibraltar. Mukonda and the 12 entities are designated pursuant to Executive Order 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act and targets perpetrators of serious human rights abuse and corruption around the world.

For identification details on Mukonda and the 12 entities that OFAC designated, see Monday's BankersOnline OFAC Update.


FinCEN working on rules for real estate sector

This morning, FinCEN announced an Advance Notice of Proposed Rulemaking ("ANPRM") to solicit public comment on a potential rule to address the vulnerability of the U.S. real estate market to money laundering and other illicit activity. FinCEN said the systemic money laundering vulnerabilities presented by the U.S. real estate sector, and consequently, the ability of illicit actors to launder criminal proceeds through the purchase of real estate, threatens U.S. national security and the integrity of the U.S. financial system.

FinCEN has long been concerned with the potential for corrupt officials and illicit actors to launder the proceeds of criminal activity through the purchase of real estate in the United States and has worked to increase transparency in the real estate sector. Given the relative stability of the real estate sector as store of value, the opacity of the real estate market, and gaps in industry regulation, the U.S. real estate market continues to be used as a vehicle for money laundering and can involve businesses and professions that facilitate (even if unwittingly) acquisitions of real estate in the money laundering process.

The ANPRM reflects the concerns highlighted in the newly released U.S. Government Strategy on Countering Corruption, which spotlights the money laundering risks in the U.S. real estate market, as well as the need to protect the sector from abuse by corrupt officials and other illicit actors.

FinCEN has not imposed general recordkeeping and reporting requirements authorized under the Bank Secrecy Act on persons involved in all-cash real estate transactions, but FinCEN has imposed specific transaction reporting requirements on title insurance companies in the form of Geographic Targeting Orders (GTOs). This ANPRM seeks comment on the approach FinCEN should take with respect to both the residential and commercial real estate sectors.

FinCEN recognizes the need to develop a rule that obtains information needed to assist law enforcement and prevent illicit finance in a way that strives to minimize the burden on reporting companies. The ANPRM seeks comments both on the benefits to law enforcement and the prevention of illicit finance as well as potential burdens or challenges that such a reporting requirement might present.

Comments will be accepted for 60 days following Federal Register publication.

UPDATE on publication and comment period: Published 12/8/2021, with comments due by 2/7/2022.


FDIC releases September CRA ratings

The FDIC has released its list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act whose ratings were assigned in September 2021. Of the 46 banks listed, 41 received ratings of Satisfactory. One Iowa bank received a rating of Needs to Improve.

We congratulate the four banks that received ratings of Outstanding:


OCC releases CRA evaluations

The OCC has released a list of Community Reinvestment Act (CRA) performance evaluations that became public in November. The list includes national banks, federal savings associations, and insured federal branches of foreign banks that have received ratings.

Of the 17 evaluations made public last month, 13 were rated satisfactory. We congratulate these four, which were rated outstanding:


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