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Top Story Compliance Related

05/24/2022

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.

05/24/2022

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.

05/23/2022

Wells Fargo Advisors pays $7M for SARS not filed

The Securities and Exchange Commission has announced charges against Wells Fargo Advisors for failing to file at least 34 Suspicious Activity Reports (SARs) in a timely manner between April 2017 and October 2021. Wells Fargo Advisors, the St. Louis-based broker-dealer, has agreed to pay $7 million to settle the charges.

According to the SEC’s order, due to Wells Fargo Advisors’ deficient implementation and failure to test a new version of its internal anti-money laundering (AML) transaction monitoring and alert system adopted in January 2019, the system failed to reconcile the different country codes used to monitor foreign wire transfers. As a result, Wells Fargo Advisors did not timely file at least 25 SARs related to suspicious transactions in its customers’ brokerage accounts involving wire transfers to or from foreign countries that it determined to be at a high or moderate risk for money laundering, terrorist financing, or other illegal money movements. The order also found that, beginning in April 2017, Wells Fargo Advisors failed to timely file at least nine additional SARs due to a failure to appropriately process wire transfer data into its AML transaction monitoring system in certain other situations.

In addition to the $7 million penalty, Wells Fargo Advisors, without admitting or denying the SEC’s findings, agreed to a censure and a cease and desist order. Wells Fargo Advisors is the trade name used by Wells Fargo Clearing Services, LLC, a registered broker-dealer and investment adviser subsidiary of Wells Fargo & Company,

05/20/2022

FDIC sets process for MDI applications

The FDIC has issued FIL-24-2022 to announce a process for an insured institution or applicant for deposit insurance to make a request that the FDIC recognize the institution as a minority depository institution. The process conforms to the FDIC's June 15, 2021, Statement of Policy Regarding Minority Depository Institutions,

  • FDIC supervised institutions or applicants for deposit insurance that seek to be recognized as an MDI may submit a written request, signed by a duly authorized officer or representative of the institution or applicant, at any time to the appropriate regional office.
    • Institutions may also submit a request in connection with a merger application or a change in control notice.
    • The request should contain sufficient information in support of the designation.
  • If the submitted documentation indicates that the institution or applicant has met the eligibility requirements, the FDIC will send a letter acknowledging recognition of the institution as an MDI.
    • The letter will describe the resources available through the MDI Program.
    • The institution or applicant should maintain documentation supporting its continued eligibility for the MDI designation.

05/20/2022

CFPB: states can enforce federal consumer protection laws

The Consumer Financial Protection Bureau yesterday announced it has issued an interpretive rule that describes states’ authorities to pursue lawbreaking companies and individuals that violate the provisions of federal consumer financial protection law. Because of the crucial role states play in protecting consumers, the Consumer Financial Protection Act (part of the Dodd-Frank Act of 2010) grants their consumer protection enforcers the authority to protect their citizens and otherwise pursue lawbreakers. The interpretive rule affirms:

  • States can enforce the Consumer Financial Protection Act, including the provision making it unlawful for covered persons or service providers to violate any provision of federal consumer financial protection law. This provision covers the Consumer Financial Protection Act itself as well as its 18 enumerated consumer laws and certain other laws, along with any rule or order prescribed by the CFPB under the Consumer Financial Protection Act, an enumerated consumer law, or pursuant to certain other authorities.
  • States can pursue claims and actions against a broad range of entities. The Consumer Financial Protection Act outlines entities over which the CFPB may exercise its enforcement authority under the statute. States are able to bring actions against a broader cross-section of companies and individuals.
  • CFPB enforcement actions do not put a halt to state actions. Sometimes states bring enforcement actions in coordination with the CFPB. A state may also bring an enforcement action to stop or remediate harm that is not addressed by a CFPB enforcement action against the same entity. Nothing in the Consumer Financial Protection Act precludes these complementary enforcement activities that serve to protect consumers at both the national and state levels.

The interpretive rule will become effective upon publication in the Federal Register.

05/20/2022

OCC enforcement actions

The OCC has released a list of enforcement actions taken by the agency in the month of April. Included was a consent order to cease and desist and pay a $30,000 civil money penalty issued to the president and CEO of a Beauregard, Louisiana, federal savings bank.

05/20/2022

Targeting Hizballah's abuse of the business sector

On Thursday, Treasury announced that OFAC had designated Ahmad Jalal Reda Abdallah, a Lebanese businessman and Hizballah financial facilitator, as well as five of his associates and eight of his companies in Lebanon and Iraq. The action was taken to counter Hizballah’s modus operandi of using the cover of seemingly legitimate businesses to generate revenue and leverage commercial investments across a multitude of sectors to secretly fund Hizballah and its terrorist activities. It also demonstrates how Hizballah goes to great lengths to establish companies with opaque ownership structure in order to conceal their involvement in these businesses, and also their involvement in criminal activities such as altering of medication labels for black market pharmaceutical sales.

For a complete list of the individuals and entities designated yesterday, see the May 19, 2022, BankersOnline OFAC Update.

05/19/2022

FDIC guide on simplified coverage rules

The FDIC has issued FIL-23-2022 to announce the addition of a Small Entity Compliance Guide to its website to assist insured depository institutions and community banking organizations in understanding and preparing for the changes in deposit insurance coverage made by its January 28, 2022, final rule amending the deposit insurance regulations for trust accounts and mortgage servicing accounts. The rule becomes effective April 1, 2024.

05/18/2022

SEC issues charges in multibillion dollar securities fraud

The Securities and Exchange Commission yesterday announced charges against Allianz Global Investors U.S. LLC (AGI US) and three former senior portfolio managers with a massive fraudulent scheme that concealed the immense downside risks of a complex options trading strategy they called “Structured Alpha.”

AGI US marketed and sold the strategy to approximately 114 institutional investors, including pension funds for teachers, clergy, bus drivers, engineers, and other individuals. After the COVID-19 market crash of March 2020 exposed the fraudulent scheme, the strategy lost billions of dollars as a result of AGI US and the portfolio managers’ misconduct.

AGI US has agreed to pay billions of dollars as part of an integrated, global resolution, including more than $1 billion to settle SEC charges and together with its parent, Allianz SE, over $5 billion in restitution to victims.

The SEC’s complaint, filed in the federal district court in Manhattan, alleges that Structured Alpha’s Lead Portfolio Manager, Gregoire P. Tournant, orchestrated the multi-year scheme to mislead investors who invested approximately $11 billion in Structured Alpha, and paid the defendants over $550 million in fees. It further alleges that, with assistance from Co-Lead Portfolio Manager Trevor L. Taylor and Portfolio Manager Stephen G. Bond-Nelson, Tournant manipulated numerous financial reports and other information provided to investors to conceal the magnitude of Structured Alpha’s true risk and the funds’ actual performance.

05/18/2022

FDIC adopts appeals guidelines

The FDIC has issued FIL-22-2022 to announce its Board has adopted Guidelines for Appeals of Material Supervisory Determinations that restore the Supervision Appeals Review Committee (SARC) as the final level of review in the agency’s supervisory appeals process. The revised Guidelines take effect May 17, 2022. The FDIC is soliciting comment on the revised Guidelines with a comment period of 30 days.

  • Under the revised Guidelines, the SARC generally replaces the Office of Supervisory Appeals as the final level of review in the FDIC’s supervisory appeals process.
  • Consistent with the composition of the SARC as it stood in 2021, the SARC will include: one inside member of the FDIC’s Board of Directors (serving as Chairperson); a deputy or special assistant to each of the other inside Board members; and the General Counsel as a non-voting member.
  • Aside from the substitution of the SARC as the final level of review, most aspects of the supervisory appeals process remain unchanged.
  • The revised Guidelines continue to encourage institutions to make good-faith efforts to resolve disputes with on-site examiners and/or the appropriate Regional Office. The Guidelines also continue to provide for review by the appropriate Division Director before submission of an appeal to the SARC.
  • The revised Guidelines expressly permit electronic submission of appeals and provide e-mail addresses that institutions may use to submit a request for review to the appropriate Division Director or an appeal to the SARC.

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