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Top Story Compliance Related

01/21/2022

OFAC targets Russian-backed actors destabilizing Ukraine

Treasury yesterday announced that OFAC has sanctioned four individuals engaged in Russian government-directed influence activities to destabilize Ukraine. This action is separate and distinct from the broad range of high impact measures the United States and its Allies and partners are prepared to impose in order to inflict significant costs on the Russian economy and financial system if it were to further invade Ukraine.

Designated yesterday were Taras Kozak and Oleh Voloshyn, two current Ukrainian Members of Parliament from the party led by Victor Medvedchuk (Medvedchuk), who is already subject to U.S. sanctions for his role in undermining Ukrainian sovereignty in 2014; Volodymyr Oliynyk, a former Ukrainian official who fled Ukraine to seek refuge in Russia; and Vladimir Sivkovich, the former Deputy Secretary of the Ukrainian National Security and Defense Council.

For identification information for the four designated individuals, see the January 20, 2022, BankersOnline OFAC Update.

01/20/2022

Report on financial services diversity and inclusion

The CFPB’s Office of Minority Women and Inclusion (OMWI) has released the CFPB Report on Diversity and Inclusion within Financial Services.

As part of the mandate of Section 342 of the Dodd-Frank Act, OMWI is charged with developing standards for assessing diversity and inclusion at the financial entities the Bureau regulates. To further that effort, CFPB engaged in analysis of public data to gain a better understanding of diversity and inclusion within the financial services sector and compiled a report to share its findings. The report can help the industry understand more about diversity and inclusion initiatives that their peers are undertaking and the various options available to entities of different sizes.

01/20/2022

IRS Wage Statement reminder

The Internal Revenue Service yesterday urged employers to be aware of the January deadline to file Forms W-2 and other wage statements. Timely filing of these documents helps employers avoid penalties and helps the IRS in fraud prevention.

A 2015 law made it a permanent requirement that employers file copies of their Form W-2, Wage and Tax Statements, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by January 31. Forms W-2 are normally due to workers by January 31. Forms 1099-MISC, Miscellaneous Information and Forms 1099-NEC, Nonemployee Compensation, are also due to taxpayers by January 31. Various other due dates related to Form 1099-MISC and Form 1099-NEC, including dates due to the IRS, can be found on the forms' instructions.

01/20/2022

FDIC guidance to assist banks in Tennessee

The FDIC has issued FIL-06-2022 with guidance to help financial institutions in areas of Tennessee affected by severe storms, straight-line winds, and tornadoes on December 10 and 11, 2021.

The Federal Emergency Management Agency (FEMA) declared a federal disaster for selected areas affected in Tennessee on January 14, 2022. FEMA may make additional designations after damage assessments are completed in the affected areas. As of January 19, the affected areas in Tennessee include Cheatham, Davidson, Dickson, Gibson, Henderson, Henry, Lake, Obion, Stewart, Sumner, Weakley and Wilson counties. An updated list of designated areas will be available at www.fema.gov.

01/19/2022

Overcharged LendingClub members to receive $10M+

The Federal Trade Commission has announced it is returning more than $10 million to consumers who were charged undisclosed fees by online lender LendingClub Corporation.

The FTC sued LendingClub in April 2018, charging that the company falsely promised loan applicants that they would receive a specific loan amount with “no hidden fees,” when in reality the company deducted hundreds or even thousands of dollars in hidden up-front fees from the loans. The FTC also alleged that LendingClub told consumers they were approved for loans when they were not and took money from consumers’ bank accounts without authorization.

The FTC is distributing refunds directly to more than 15,000 LendingClub customers and encouraging additional LendingClub customers to apply for refunds. The FTC is sending refunds via PayPal to 15,748 LendingClub customers who complained to the company or the FTC about the hidden fees. In addition, between January 18 and 20, the FTC will email additional LendingClub customers who took out loans before January 6, 2017 and repaid the loan. The email will provide instructions on how to request a refund.

01/19/2022

Fed Board issues C&D order to Nano Banc and holding companies

The Board of Governors of the Federal Reserve System has issued an Order to Cease and Desist to Nano Banc and its holding companies, Allegiant United Holdings, LLC and Nano Financial Holdings, Inc., all of Irvine, California. According to the Order, the bank is operating without a permanent chief executive officer and chief financial officer, or a sufficient number of board members. In December 2021, the California Department of Financial Institutions ordered the bank's board to increase the number of directors to comply with state law.

The Fed Board's order requires that:

  • Within 10 days, the holding companies and bank must propose qualified permanent executive officers to fill the role of chief executive officer, chief financial officer, and chief credit officer of the bank
  • Within 10 days, the holding companies and bank must propose a sufficient number of qualified directors required under California law, with a majority being outside directors
  • Nano Financial and the bank must provide the Reserve Bank of San Franciso 30 day's written notice before certain changes to their boards of directors or executive officers.
  • The bank must submit a written plan to the Reserve Bank to enhance the bank's compliance with Regulation O and engage an independent third party acceptable to the Reserve Bank to identify and review all extensions of credit between insiders and the bank during the two years preceding the Order
  • The bank must submit written lending and credit administration policies to the Reserve Bank
  • Pending approval of the lending and credit administration policies by the Reserve Bank, the bank may not directly or indirectly approve, extend, modify or renew any "covered loan" without prior approval of the Reserve Bank. "Covered loans" comprises (i) loans classified as "loss," "doubtful," or "substandard" in the most recent Report of Examination; (ii) loans made to shareholders, senior executives, directors, and/or any entities which they control; (iii) commercial real estate loans; (iv) commercial and industrial loans; and (v) loan to finance commercial real estate, construction, and land development activities (not secured by real estate).
  • The bank and its holding companies must act to ensure the bank complies with sections 23A and 23B of the Federal Reserve Act and with Federal Reserve Board Regulation W, and the bank must submit a written policy acceptable to the Reserve Bank regarding transactions between the holding companies and the bank. The holding companies and the bank must correct the violations of sections 23A and 23B and Regulation W cited in the most recent Report of Examination.
  • The bank must take specified action with regard to compensation governance, policies, procedures and internal controls.

    01/19/2022

    OFAC sanctions Hizballah financiers in Lebanon

    On Tuesday, the Department of the Treasury announced that OFAC has designated three Hizballah-linked financial facilitators—Adel Diab, Ali Mohamad Daoun, and Jihad Salem Alame— and their Lebanon-based travel company, Dar Al Salam for Travel & Tourism, under Executive Order 13224, which targets terrorists, leaders, and officials of terrorist groups, and those providing support to terrorists or acts of terrorism.

    Identification information on the designated individuals and entity can be found in the January 18, 2022, BankersOnline OFAC Update.

    As a result of today’s action, all property and interests in property of the designated individuals and entity and of any entities that are owned, directly or indirectly 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of U.S. persons, must be blocked and reported to OFAC. Unless authorized by a general or specific license issued by OFAC or otherwise exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of designated or otherwise blocked persons.

    01/18/2022

    CFPB alert on discrimination involving religion

    The CFPB has posted a Bureau Blog article, "It's illegal to penalize borrowers for being religious," concerning recent findings that some lenders had violated fair lending law by inquiring about small business applicants' religious affiliation and by consider an applicant's affiliation in the credit decision.

    For religious institutions applying for small business loans, lenders utilized questionnaires which contained explicit inquiries about the applicant’s religious affiliation. CFPB examiners determined that lenders also denied credit to applicants identified as a religious institution because the applicants did not respond to the questionnaire.

    In response to these findings, lenders updated the questionnaires to ensure compliance with fair lending laws. In addition, lenders also identified affected applicants and provided an offer for each identified applicant to reapply for a small business loan.

    The article also expressed concern about how financial institutions might be making use of artificial intelligence and other algorithmic decision tools, and how a lender might use third-party data to analyze geolocation data to power their credit decision tools. If the algorithm leads to an applicant getting penalized for attending religious services on a regular basis, this could lead to sanctions under fair lending laws for engaging in such "robo-discrimination."

    01/18/2022

    Bureau settles suit over taskforce report

    In October 2019, the CFPB chartered a Taskforce on Federal Consumer Financial Law to provide recommendations to improve consumer financial laws and regulations. On January 5, 2021, the Taskforce released its report and recommendations. Shortly thereafter, the National Association of Consumer Advocates, U.S. Public Interest Research Group, and Professor Kathleen Engel brought suit against the CFPB, alleging that the Taskforce did not comply with the Federal Advisory Committee Act (FACA).

    The Bureau has announced it entered into a stipulated settlement agreement that required that the CFPB release all Taskforce records that would have been made public if the Bureau had complied with FACA's "sunshine" requirements by March 22, 2022. The Taskforce records will also be made publicly available on the CFPB's website. A disclaimer has been added to the Taskforce's report noting that the CFPB failed to comply with FACA and that the report should not be relied upon as a product of a FACA-compliant federal advisory committee.

    Taskforce report (amended 1/14/2022):

    01/18/2022

    CSBS withdraws suit challenging OCC charter

    The Office of the Comptroller of the Currency has announced that the Conference of State Bank Supervisors on Thursday withdrew its lawsuit challenging the OCC's authority to charter an uninsured deposit-taking national bank.

    In December 2021, Figure Technologies amended its charter application for Figure Bank, National Association, to offer FDIC-insured deposit accounts. In connection with this amendment, the organizers will apply to the Federal Deposit Insurance Corporation (FDIC) for deposit insurance, and Figure Technologies, Inc. will apply for approval from the Board of Governors of the Federal Reserve System to become a bank holding company under Section 3 of the Bank Holding Company Act.

    While the OCC maintains that it has the authority to charter an uninsured institution, including one that takes deposits, Figure Technologies’ decision to amend the application and seek a full service charter rendered the lawsuit moot.

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