Top Story Compliance Related

The FATF has published its report to the G20 Leaders' Summit in Buenos Aires, Argentina. The report sets out FATF’s ongoing work to fight money laundering and terrorist financing in:

The OCC has issued its Fall 2018 Semiannual Risk Perspective. The report highlights include:

• Credit quality remains strong, but the OCC is monitoring the origination quality of new loans, the potential for increased lender complacency within credit risk identification and management, and the potential embedded risks from successive years of eased underwriting.
• Operational risk is elevated as banks respond to an evolving and increasingly complex operating environment.
• Compliance risk is elevated as banks manage money laundering risks and comply with amended consumer protection requirements.
• Rising interest rates and increased competition for deposits may result in changes in funding mix or costs.

The report presents information in five main areas: the operating environment, bank performance, special topics in emerging risk, trends in key risks, and supervisory actions. It focuses on issues that pose threats to those financial institutions regulated by the OCC and is intended as a resource to the industry, examiners, and the public.

The Federal Reserve Board, FDIC, FinCEN, NCUA, and OCC have issued a joint statement to encourage banks and credit unions to consider, evaluate, and, where appropriate, responsibly implement innovative approaches to meet their Bank Secrecy Act/anti-money laundering (BSA/AML) compliance obligations. The joint statement does not alter existing BSA/AML legal or regulatory requirements, nor does it establish new supervisory expectations. The Agencies will not advocate a particular method or technology for banks to comply with BSA/AML requirements. Banks that maintain BSA/AML compliance programs commensurate with their risk profiles, but choose not to pursue innovative approaches will not be penalized or criticized by the Agencies issuing the statement.

The FDIC has released a list of orders of administrative enforcement actions taken against banks an individuals in October 2018. Included were four consent orders; one temporary order to cease and desist; four removal and prohibition orders; three civil money penalties (CMPs) and one notice.

• Republic Bank & Trust Company, Louisville, Kentucky, was assessed a CMP of $300,000 for Truth in Lending violations and for deceptive acts or practices.
• Gibsland Bank & Trust Company, Gibsland, Louisiana, was assessed a $9,600 CMP for violations of the Flood Disaster Protection Act
• A former senior vice president and/or senior credit administrator of a Walhalla, SC bank was assessed a $5,000 CMP and issued an order of prohibition for making at least 14 fraudulent loans
• Orders of prohibition were also issued to:
  • A former universal banker at a Philadelphia, PA bank, found to have used her position to steal customer's non-public personal information, which was given to associates who manufactured false IDs used to make unauthorized withdrawals for those customers' accounts
  • A former teller and assistant branch manager at a Rockville, MD bank, found to have made numerous unauthorized withdrawals from a bank customer's account
  • A former general counsel at a New Orleans, LA, bank, who received and did not return to the bank unearned attorney's fees of $150,000
• A temporary cease and desist order was issued to a Gunnison, Utah, bank, ordering the bank to immediately suspend its document disposal and destruction schedule for several classes of electronic and hardcopy documents.

CFPB Ombudsman Wendy Kamenshine has announced the release of the 2018 Annual Report to the Director of the CFPB. The report includes information on systemic issues reviewed in 2018, individual inquiry analysis, and descriptions of Bureau inreach (internal engagement) and outreach activities.

The OCC has released its schedule of Community Reinvestment Act (CRA) evaluations to be conducted in the first and second quarters of 2019.

The Federal Reserve Board has published [83 FR 61408] a proposed rule that would establish risk-based categories for determining prudential standards for large U.S. banking organizations, consistent with section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The proposal would also amend certain prudential standards, including standards relating to liquidity, risk management, stress testing, and single-counterparty credit limits, to reflect the risk profiles of banking organizations under each proposed category of standards and would apply prudential standards to certain large savings and loan holding companies using the same categories. In addition, the proposal would make corresponding changes to reporting forms. Comments are due by January 22, 2019.

Treasury has announced proposed regulations related to the determination of foreign tax credits following the implementation of the Tax Cuts and Jobs Act. The proposed regulations provide guidance on computing foreign tax credits, and include rules for allocating and apportioning deductions that determine taxable income from foreign sources. Changes to the treatment of foreign tax credits under the new law included adding new foreign tax credit limitation categories, and providing new foreign tax credit rules related to the enactment of the global intangible low taxed income provisions. The proposed regulations provide rules on the allocation and apportionment of deductions, including a rule treating certain assets as partially exempt for expense allocation purposes. The regulations also establish rules on applying the new foreign tax credit limitation categories, and include a taxpayer favorable elective transition rule for carryovers of foreign tax credits.

OFAC has designated two Iran-based individuals, Ali Khorashadizadeh and Mohammad Ghorbaniyan, who helped exchange digital currency (bitcoin) ransom payments into Iranian rial on behalf of Iranian malicious cyber actors involved with the SamSam ransomware scheme that targeted over 200 known victims. In a first for OFAC, it has identified two digital currency addresses associated with these two financial facilitators.

In a related action, the U.S. Department of Justice today indicted the two Iranian criminal actors for infecting numerous data networks with SamSam ransomware in the United States, United Kingdom, and Canada since 2015. OFAC also updated its FAQs with additional information on compliance requirements for digital currencies. For identification details (including the digital currency addresses) for the two designated individuals, see our OFAC Update.

The FDIC has published [83 FR 61111] a final rule amending its rules of practice and procedure to remove duplicative, descriptive regulatory language related to civil money penalty (CMP) amounts that restates existing statutory language; codify Congress's recent change to CMP inflation-adjustments in the FDIC's regulations; and direct readers to an annually published notice in the Federal Register—rather than the Code of Federal Regulations (CFR)—for information regarding the maximum CMP amounts that can be assessed after inflation adjustments.