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Top Story Compliance Related


OCC posts CRA evaluation schedule for July–December

The OCC has its schedule of Community Reinvestment Act evaluations to be conducted in the third and fourth quarters of 2022. The list is in alphabetic order by state.


OFAC targets terrorist groups' oil smuggling network

On Wednesday, Treasury announced that OFAC had designated an international oil smuggling and money laundering network led by Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) officials that has facilitated the sale of hundreds of millions of dollars’ worth of Iranian oil for both the IRGC-QF and Hizballah.This oil smuggling network has acted as a critical element of Iran’s oil revenue generation, as well as its support for proxy militant groups that continue to perpetuate conflict and suffering throughout the region.

For identification of the ten individuals and nine entities designated yesterday, see the May 25, 2022, BankersOnline OFAC update.


FATF updates evaluation of Israel's AML/CFT network

The Financial Action Task Force (FATF) has posted a follow-up-report on its 2018 assessment of Israel’s measures to tackle money laundering and terrorist financing. The FATF has now re-rated the country on the wire transfer recommendation, from "partially compliant" to "largely compliant."

The report also looks at whether Israel's measures meet the requirements of FATF Recommendations 2 and 15, which changed since their mutual evaluation. The FATF agreed to upgrade the rating of Recommendation 15 (New technologies), to largely compliant.

Today, Israel is compliant on 16 Recommendations and largely compliant on 19. It remains partially compliant on 4 Recommendations (one Recommendation is non-applicable to Israel).


FTC Safeguards Rule guidance

The Federal Trade Commission has announced the publication of FTC Safeguards Rule: What Your Business Needs to Know. The Rule requires financial institutions within the FTC’s jurisdiction to have measures in place to keep customer information secure. The new guidance publication explains which entities are subject to the rule, and reminds those entities of their responsibility to ensure their information security programs are in step with their current business practices and emerging security risks.


FTC order against EPS

The Federal Trade Commission on Tuesday announced it has finalized an order against Electronic Payment Systems, LLC for allegedly opening credit card processing merchant accounts for fictitious companies on behalf of Money Now Funding, a business opportunity scam that the FTC previously sued. By ignoring warning signs that the merchants were fake, Electronic Payment Systems assisted Money Now Funding in laundering millions of dollars of consumers’ credit card payments to the scammers from 2012 to 2013.

In an administrative complaint filed in March 2022, the FTC alleged that Electronic Payment Systems facilitated the Money Now Funding scam by creating 43 different merchant accounts for fictitious companies on behalf of Money Now Funding, allowing the scammers to run more than $4.6 million in consumer credit card charges through those accounts. The practice of processing credit card transactions through another company’s merchant accounts is known as credit card laundering. The complaint also outlined ways in which Electronic Payment Systems employees turned a blind eye to the credit card laundering, and even gave advice to Money Now Funding on how to spread charges among different accounts to evade detection.

The FTC is ordering Electronic Payment Systems, and its owners John Dorsey and Thomas McCann, to make a number of substantial changes to their processes that will ensure they do not further harm consumers moving forward. The FTC is not able to obtain a monetary judgment in this case because of the Supreme Court’s decision in AMG Capital Management v. FTC.

Under the terms of the settlement order, Electronic Payment Systems, Dorsey, and McCann would be:

  • Prohibited from credit card laundering: The defendants would be prohibited from credit card laundering and any other actions to evade fraud and risk monitoring programs.
  • Prohibited from working with certain merchants: The defendants would be prohibited from providing payment processing services to any merchant that is, or is likely to be, engaged in deceptive or misleading conduct, and any merchant that credit card industry monitoring programs have flagged as high-risk for certain reasons.
  • Required to screen potential merchants: The defendants would be required to conduct detailed screening of potential merchants who conduct outgoing telemarketing or are engaged in certain activities that could harm consumers.


CFPB launches Office of Competition and Innovation

On Tuesday, the CFPB announced it is opening a new office, the Office of Competition and Innovation, as part of a new approach to help spur innovation in financial services by promoting competition and identifying stumbling blocks for new market entrants. The office will replace the Office of Innovation that focused on an application-based process to confer special regulatory treatment on individual companies. The new office will support a broader initiative by the CFPB to analyze obstacles to open markets, better understand how big players are squeezing out smaller players, host incubation events, and, in general, make it easier for people to switch financial providers.

The new office will support the CFPB’s general effort at increasing competition for the benefit of all consumers. Specifically, the CFPB wants to:

  • Give consumers their walking rights to switch providers: The CFPB will be exploring ways to reduce the barriers to switching accounts and providers.
  • Research structural problems blocking successes: The new office will be housed in the CFPB’s Research, Markets, and Regulation division, giving it greater access to resources to look at market-structure problems that create obstacles to innovation. For example, this could include greater explorations of the payment networks market or the credit reporting system, both of which are essential to our financial system but have only a few dominant players.
  • Understand how bigger players can gain advantage over smaller players: Sometimes start-ups simply get run over by bigger players. For example, big companies can easily pitch new products to their large customer bases and stymie outside players who may have more favorable products. Big tech companies, with their huge reaches, are also seeking new ways to join consumer finance markets and may threaten fair competition.
  • Identify ways to address commonplace obstacles: Innovators may not be getting their products or services to market because of more practical problems like access to capital or talent. Or they may not launch because they don’t have access to the large volumes of digital data stored by the big banks. A future rulemaking by the CFPB under Section 1033 of the Consumer Financial Protection Act will give consumers access to their own data.
  • Host events to explore barriers to entry and other obstacles: The new office will convene events such as open houses, sprints, hackathons, tabletop exercises, and war games. Entrepreneurs, small business owners, and technology professionals will be able to collaborate, explore obstacles, and share frustrations with government regulators. Results will be shared publicly.

The CFPB is also encouraging companies, start-ups, as well as members of the public to file rulemaking petitions to ask for greater clarity on particular rules.


OFAC targets covert Hamas investment network and official

On Tuesday, the Treasury Department announced OFAC had designated a Hamas finance official as well as an expansive network of three Hamas financial facilitators and six companies that have generated revenue for the terrorist group through the management of an international investment portfolio. For the names and identifying information of the four individuals and six entities designated by OFAC, see Tuesday's BankersOnline OFAC Update.


SEC charges BNY Mellon Investment Adviser

The Securities and Exchange Commission yesterday announced it had charged BNY Mellon Investment Adviser, Inc. for misstatements and omissions about Environmental, Social, and Governance (ESG) considerations in making investment decisions for certain mutual funds that it managed. To settle the charges, BNY Mellon Investment Adviser agreed to pay a $1.5 million penalty, and to a cease-and-desist order and censure, without admitting or denying the SEC’s findings.

The SEC’s order finds that, from July 2018 to September 2021, BNY Mellon Investment Adviser represented or implied in various statements that all investments in the funds had undergone an ESG quality review, even though that was not always the case. The order finds that numerous investments held by certain funds did not have an ESG quality review score as of the time of investment.


Advisory on risks for businesses operating in Sudan

OFAC on Monday announced the U.S. Departments of State, Treasury, Commerce, and Labor issued an advisory on "Risks and Considerations for U.S. Businesses Operating in Sudan" to highlight growing risks to American businesses and individuals associated with conducting business with Sudanese State-Owned Enterprises, which includes all companies under military control. These risks arise from recent actions undertaken by Sudan’s Sovereign Council and security forces under the military’s control and could adversely impact U.S. businesses, individuals, other persons, and their operations in the country and the region.


CFPB and NY AG shut down debt collection ring

The CFPB announced on Monday that it, in partnership with the New York Attorney General, filed a proposed stipulated judgment in federal court to settle its case against a debt collection enterprise and its owners and managers. The judgment would order all participants in the scheme, based in upstate New York, to exit the debt collection market after their history of deception and harassment. Their debt collection companies would also be shuttered and required to pay a total of $4 million in penalties.

The defendant companies are JPL Recovery Solutions; Regency One Capital; ROC Asset Solutions, which does business as API Recovery Solutions and Northern Information Services; Check Security Associates, which does business as Warner Location Services, Pinnacle Location Services, and Orchard Payment Processing Systems; Keystone Recovery Group; and Blue Street Asset Partners. The individual defendants are owners Christopher Di Re, Scott Croce, and Susan Croce, as well as Brian Koziel and Marc Gracie, who acted as managers of some or all of the companies.

The companies are interrelated collections businesses based out of a single location in Getzville, New York. Together, they purchased defaulted consumer debt for pennies on the dollar. The debt came from high-interest personal loans, payday loans, credit cards, and other sources. The network then attempted to collect debts from about 293,000 consumers, generating gross revenues of approximately $93 million between 2015 and 2020.

The lawsuit filed by the CFPB and the New York Attorney General in September 2020 allege that the network used deceptive and harassing methods, violating the Fair Debt Collection Practices Act and the Consumer Financial Protection Act. Specifically, the complaint alleges that the owners, managers, and companies used the following illegal tactics to collect debt:

  • Falsely threatened arrest and imprisonment
  • Lied about legal action that it never took
  • Inflated and misrepresented debt amounts owed
  • Created “smear campaigns” using social media and other methods to pressured people to pay by contacting and disclosing the debts to their immediate and distant family members, grandparents, in-laws, ex-spouses, employers, work colleagues, landlords, Facebook friends, and other known associates
  • Harassed people with repeated phone calls, calling people multiple times every day over periods lasting a month or longer.
  • Failed to provide legally mandated disclosures

The proposed stipulated judgment filed yesterday, if ordered, would require that the companies, as well as their owners and senior managers, exit the debt collection market. The defendants also must pay a $2 million penalty to the CFPB, which will be deposited into the CFPB’s victim relief fund, and a $2 million penalty to the New York Attorney General. If the defendants fail to make timely payments, however, each penalty amount due would increase to $2.5 million.


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