Top Story Compliance Related

The CFPB has releases issue 33 of its Supervisory Highlights report. The findings in this report cover select examinations regarding mortgage servicing completed from April 1 through December 31, 2023.

The report indicates that examiners continue to find supervised mortgage servicers assessing junk fees, including unnecessary property inspection fees and improper late fees. Additionally, examiners found that mortgage servicers engaged in other unfair, deceptive, and abusive acts or practices (UDAAP) such as sending deceptive loss mitigation eligibility notices to consumers. Mortgage servicers also violated several of Regulation X’s loss mitigation provisions.

Outlook Live reports that its April 17, 2024, webinar, "Compliance Resources: Learning Where to Find Answers to Your Compliance Questions," is now available for downloading from the Outlook Live website. The slides were updated to add additional resources.

The Financial Stability Board (FSB) has announced its publication of a report on financial resources and tools for central counterparty (CCP) resolution.

The availability of adequate resources and tools for CCP resolution remains critical for financial stability and for ensuring confidence in the financial system. Progress in implementing the G20 regulatory reforms agreed to after the 2008-09 financial crisis, including the central clearing mandate, has increased the systemic importance of CCPs. While material advances have been achieved to enhance the resilience and recovery of CCPs, it is also necessary to ensure that adequate financial resources and tools are available in resolution to maintain the continuity of critical functions and safeguard financial stability, should resolution become necessary.

The FSB has developed a global standard for financial resources and tools to facilitate the orderly resolution of systemically important CCPs with two expectations:

• Resolution authorities of systemically important CCPs should have access to a set of resolution-specific resources and tools, in addition to recovery resources and tools where these are available to the resolution authority. The resolution toolbox should include a combination of resolution-specific resources and tools from the list of seven in the report. Not all seven resources and tools need to be included. Financial resources and tools have different strengths and weaknesses, and no single resource or tool would be sufficient by itself to meet the resolution objectives.
• Jurisdictions should make their approach to calibrating the resolution-specific resources and tools in the toolbox transparent.

The FSB will monitor implementation for CCPs that are systemically important in more than one jurisdiction through the FSB’s regular monitoring tools. The findings will be aggregated and published in the FSB’s annual Resolution Report.

The Labor Department announced yesterday that it has issued a final rule that expands overtime pay protections by increasing the salary thresholds required to exempt a salaried bona fide executive, administrative or professional employee from federal overtime pay requirements.

Effective July 1, 2024, the salary threshold will increase to the equivalent of an annual salary of $43,888 and increase to $58,656 on Jan. 1, 2025. The July 1 increase updates the present annual salary threshold of $35,568 based on the methodology used by the prior administration in the 2019 overtime rule update. On January 1, 2025, the rule’s new methodology takes effect, resulting in the additional increase. In addition, the rule will adjust the threshold for highly compensated employees. Starting July 1, 2027, salary thresholds will update every three years, by applying up-to-date wage data to determine new salary levels.

The U.S. Department of Labor has announced it has finalized its Retirement Security Rule to protect the millions of workers who are saving for retirement diligently and rely on advice from trusted professionals on how to invest their savings. This final rule will achieve this by updating the definition of an investment advice fiduciary under the Employee Retirement Income Security Act and the Internal Revenue Code.

The final rule and related amended prohibited transaction exemptions require trusted investment advice providers to give prudent, loyal, honest advice free from overcharges. These fiduciaries must adhere to high standards of care and loyalty when they recommend investments and avoid recommendations that favor the investment advice providers’ interests — financial or otherwise — at the retirement savers’ expense. Under the final rule and amended exemptions, financial institutions overseeing investment advice providers must have policies and procedures to manage conflicts of interest and ensure providers follow these guidelines.

The updated definition of an investment advice fiduciary, which takes effect on September. 23, 2024, applies when trusted financial services providers give compensated investment advice to retirement plan participants, individual retirement account owners and plan officials responsible for administering plans and managing their assets.

The Federal Trade Commission yesterday announced a final rule to promote competition by banning noncompetes nationwide.

Under the FTC’s new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date. Existing noncompetes for senior executives — who represent less than 0.75% of workers — can remain in force under the FTC’s final rule, but employers are banned from entering into or attempting to enforce any new noncompetes, even if they involve senior executives. Employers will be required to provide notice to workers other than senior executives who are bound by an existing noncompete that they will not be enforcing any noncompetes against them.

In the final rule, the Commission has determined that it is an unfair method of competition, and therefore a violation of Section 5 of the FTC Act, for employers to enter into noncompetes with workers and to enforce certain noncompetes.

The Commission said that trade secret laws and non-disclosure agreements (NDAs) both provide employers with well-established means to protect proprietary and other sensitive information. Researchers estimate that over 95% of workers with a noncompete already have an NDA.

The final rule will become effective 120 days after it is published in the Federal Register.

On Tuesday, a Treasury Department news release reported that OFAC has sanctioned two companies and four individuals involved in malicious cyber activity on behalf of the Iranian Islamic Revolutionary Guard Corps Cyber Electronic Command (IRGC-CEC). These actors targeted more than a dozen U.S. companies and government entities through cyber operations, including spear phishing and malware attacks. In conjunction with today’s action, the U.S. Department of Justice and the Federal Bureau of Investigation unsealed an indictment against the four individuals for their roles in cyber activity targeting U.S. entities.

Treasury also reported that OFAC had sanctioned two leaders of al-Qa’ida-aligned terrorist group Jama’at Nusrat al-Islam wal-Muslimin (JNIM) for hostage-taking of U.S. persons in West Africa. The Department of State concurrently announced its designation of seven JNIM leaders.

For names and identification information of the designated parties, see the April 23, 2024, BankersOnline OFAC Update.

HUD has announced it has published [89 FR 30850] in this morning's Federal Register a final rule with a Federal Flood Risk Management Standard (FFRMS) to help communities prepare for and reduce flood damage. This rule aims to protect communities from flood risk, heavy storms, increased frequency of severe weather events and disasters, changes in development patterns, and erosion.

The final rule implements the FFRMS required by Executive Order 13690 (1/30/2015) by updating two of HUD’s regulations: Part 55, Floodplain Management and Protection of Wetlands and Part 200, Minimum Property Standards. This rule strengthens standards by increasing elevations and flood proofing requirements of properties in areas at risk of flooding, where federal funds are used to develop or provide financing for new construction within the now defined FFRMS floodplain. It also applies to substantial improvement to structures financed through HUD grants, subsidy programs, and applicable multifamily programs. The update to Minimum Property Standards only applies to FHA-insured new construction within the 100-year floodplain.

Yesterday was Earth Day. FinCEN issued a reminder to financial institutions to remain vigilant in identifying and reporting suspicious activity related to environmental crimes. Environmental crimes frequently involve transnational criminal activity related to several of FinCEN’s Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) National Priorities, including corruption, fraud, human trafficking, and drug trafficking.

FinCEN has previously published resources to help stakeholders identify and combat environmental crimes and associated illicit financial activity. FinCEN’s December 2021 Financial Threat Analysis contains information on wildlife trafficking threat patterns and trend information identified in Bank Secrecy Act (BSA) data. FinCEN’s Notice FIN-2021-NTC4 provides financial institutions with specific Suspicious Activity Report (SAR) filing instructions and highlights illicit financial activity related to several types of environmental crimes such as wildlife trafficking and illegal logging, fishing, or mining. SAR filings, along with effective implementation of BSA compliance requirements, are crucial to identifying and stopping environmental crimes and related money laundering.

On Friday, the Treasury Department reported that OFAC has imposed sanctions on two entities — Mount Hebron Fund and Shlom Asiraich — for their roles in establishing fundraising campaigns on behalf of Yinon Levi and David Chai Chasdai, two violent extremists who were sanctioned on February 1, 2024, in connection with violence in the West Bank.

Concurrently, the Department of State designated Ben Zion Gopstein, the founder and leader of Lehava, an organization whose members have engaged in destabilizing violence affecting the West Bank.

For identification information on the designated parties, see BankersOnline’s April 19, 2024, OFAC Update.