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Top Story Compliance Related

10/19/2021

CFPB acts against prison financial services company

The CFPB on Tuesday announced it took action against the prison financial services company JPay for violating the Consumer Financial Protection Act by charging consumers fees to access their own money on prepaid debit cards that consumers were forced to use.

JPay also violated the Electronic Fund Transfer Act when it required consumers to sign up for a JPay debit card as a condition of receiving government benefits – in particular, “gate money,” which is money provided under state law to help people meet their essential needs as they are released from incarceration. The consent order severely limits the fees JPay can charge on release cards going forward, allowing only inactivity fees after 90 days without card activity. The order also requires the company to pay $4 million for consumer redress and a $2 million civil money penalty.

JPay, a Delaware company, headquartered in Miramar, Fla., is a dominant provider of financial services to prisons and jails nationwide. JPay is owned by the private equity firm Platinum Equity Partners. Since 2011, JPay has provided approximately 1.2 million debit release cards to consumers. JPay calls itself “a highly trusted name in corrections,” but the company leveraged its relationships with state and local departments of correction to impose fees on consumers exiting the prison or jail system. JPay’s fee-bearing debit release card replaced cash or check options previously offered by state departments of correction. The Bureau's Consent Order states that JPay—

  • Abused its market dominance
  • Illegally required consumers in certain states to receive protected government benefits on debit release cards
  • Charged fees without authorization
  • Misrepresented fees to consumers

The Bureau's Consent Order requires JPay to:

  • Stop charging most fees. JPay cannot charge any fees on release cards, except an inactivity fee after 90 days of inactivity
  • Refund harmed consumers by paying $4 million to the Bureau for monetary relief and damages for injured consumers
  • Pay a civil money penalty of $2 million to the Bureau

10/19/2021

IRS videoconferences now available to all large businesses

The IRS has announced that, beginning October 18, the IRS's large business division will accept all taxpayer requests to meet with IRS employees using secure videoconferencing. This step extends the practice used during the pandemic to accommodate taxpayers who sought more than meeting with an IRS employee over telephone calls.

A new guidance requires Large Business and International Division (LB&I) employees to grant large business taxpayer requests for a secure video meeting with IRS-approved platforms in lieu of an in-person or telephone discussion with a compliance function. It also includes the expanded use of secure email and the launch of a virtual reading room environment to enable large LB&I taxpayers and IRS agents to share certain privileged taxpayer documents in a read-only capacity. In addition, LB&I also launched and expanded its use of paperless processes so that cases can continue to move swiftly through examination and resolution.

10/18/2021

Two whistleblowers get $40M from SEC

The Securities and Exchange Commission has announced awards of approximately $40 million to two whistleblowers whose information and assistance contributed to the success of an SEC enforcement action.

The first whistleblower, whose information caused the opening of the investigation and exposed difficult-to-detect violations, will receive an award of approximately $32 million. The first whistleblower also provided substantial assistance to the staff, including identifying witnesses and helping the staff to understand complex fact patterns. The second whistleblower, who submitted important new information during the course of the investigation but waited several years to report to the Commission, will receive an award of approximately $8 million.

The SEC has awarded approximately $1.1 billion to 218 individuals since issuing its first award in 2012. All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators. No money has been taken or withheld from harmed investors to pay whistleblower awards. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10–30 percent of the money collected when the monetary sanctions exceed $1 million.

10/18/2021

IRS updates FAQ process

The IRS has announced it is updating its process for managing certain frequently asked questions (FAQs) on newly enacted tax legislation. The IRS is updating this process to address concerns regarding transparency and the potential impact on taxpayers when these FAQs are updated or revised. At the same time, the IRS is addressing concerns regarding the potential application of penalties to taxpayers who rely on FAQs by providing clarity to taxpayers as to their ability to rely on FAQs for penalty protection.

Significant FAQs on newly enacted tax legislation, as well as any later updates or revisions to these FAQs, will now be announced in a news release and posted on IRS.gov in a separate Fact Sheet. These Fact Sheet FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of Fact Sheet FAQs will be maintained on IRS.gov to ensure that, if a Fact Sheet FAQ is later changed, taxpayers can locate the version they relied on if they later need to do so. In addition to significant FAQs on new legislation, the IRS may apply this updated process in other contexts, such as when FAQs address emerging issues.

10/18/2021

OCC releases FY2022 Bank Supervision Plan

The OCC has released its bank supervision operating plan for fiscal year 2022.The plan provides the foundation for policy initiatives and for supervisory strategies as applied to individual national banks, federal savings associations, federal branches, federal agencies, and technology service providers. OCC staff members use this plan to guide their supervisory priorities, planning, and resource allocations.

Supervisory strategies for FY 2022 will focus on—

  • strategic and operational planning to ensure banks maintain stable financial positions
  • credit risk management, allowances for loan and lease losses, and allowances for credit losses
  • cybersecurity and operational resilience
  • oversight of third parties and related concentrations
  • Bank Secrecy Act/anti-money laundering (BSA/AML) compliance management
  • consumer compliance management systems and fair lending risk
  • Community Reinvestment Act performance
  • the impact of a low-rate environment and the transition to alternative reference rates given the cessation of LIBOR
  • payment systems products and services
  • fintech partnerships for potential cryptocurrency-related activities and other services
  • climate change risk management

10/18/2021

Treasury continues campaign against ransomware

The Treasury Department on Friday announced that, building on OFAC's earlier designation of a virtual currency exchange for facilitating transactions for ransomware actors, additional steps have been taken to help the virtual currency industry prevent exploitation by sanctioned persons and other illicit actors. New industry-specific guidance outlines sanctions compliance best practices tailored to the unique risks posed in this dynamic space, while new data from the Financial Crimes Enforcement Network (FinCEN) shows the increasing threat ransomware posed to the U.S financial sector, businesses, and the public during the first half of 2021.

Treasury’s actions underscore the need for a collaborative approach to counter ransomware attacks, including public-private partnerships and close relationships with international partners. The private sector plays a key role by implementing appropriate sanctions and anti-money laundering/countering the financing of terrorism (AML/CFT) controls to prevent sanctioned persons and other illicit actors from exploiting virtual currencies and undermining U.S. foreign policy and national security interests.

10/18/2021

FinCEN issues ransomware report

FinCEN has issued a financial trend analysis on ransomware trends in Bank Secrecy Act reports filed between January 2021 and June 2021. This report, issued pursuant to the Anti-Money Laundering Act of 2020, focuses on pattern and trend information pertaining to ransomware, in line with FinCEN’s issuance of government-wide priorities for anti-money laundering and countering the financing of terrorism policy.

10/18/2021

OFAC guidance for virtual currency industry

OFAC has posted a notice that it has published a brochure, "Sanctions Compliance Guidance for the Virtual Currency Industry," as a resource to help members of the virtual currency industry navigate and comply with OFAC sanctions. It provides an overview of OFAC sanctions requirements and procedures, including licensing and enforcement processes, and highlights sanctions compliance best practices tailored for the virtual currency industry.

10/15/2021

SEC reopens comment period on clawbacks proposal

The Securities and Exchange Commission has reopened the comment period on proposed rules for listing standards for the recovery of erroneously awarded compensation. The reopened comment period permits interested parties to submit further comments and data on rule amendments the Commission first proposed in 2015 as well as comments in response to questions being raised by the Commission now in its reopening release. In addition, interested parties may comment on developments since 2015 when the proposing release was issued, including trends in accounting practices and the potential economic and other effects of the proposal in light of any such developments.

“I support today’s action to reopen comment on the Dodd-Frank Act rule regarding clawbacks of incentive-based executive compensation,” said SEC Chair Gary Gensler. “I believe we have an opportunity to strengthen the transparency and quality of corporate financial statements, as well as the accountability of corporate executives to their investors.”

The public comment period will remain open for 30 days following publication of the release in the Federal Register.

10/14/2021

SEC amends filing fee disclosure and payment methods

The SEC has adopted amendments to modernize filing fee disclosure and payment methods. Operating companies and investment companies (funds) pay filing fees when engaging in certain transactions, including registered securities offerings, tender offers, and mergers and acquisitions. The amendments revise most fee-bearing forms, schedules, and related rules to require companies and funds to include all required information for filing fee calculation in a structured format. The amendments also add new options for ACH and debit and credit card payment of filing fees and eliminate infrequently used options for filing fee payment via paper checks and money orders. The amendments are intended to improve filing fee preparation and payment processing by facilitating both enhanced validation through filing fee structuring and lower-cost, easily routable payments through the ACH payment option.

The amendments generally will be effective on January 31, 2022, but the changes adding options for filing fee payment via ACH and debit/credit card and eliminating the option for payment by paper checks and money orders will be effective May 31, 2022. The Commission's Fact Sheet on the changes includes additional implementation details.

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