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Top Story Compliance Related

03/18/2024

FinCEN ruling on CIP/CDD for charitable beneficiaries of IRA

On Friday, FinCEN published an administrative ruling regarding Customer Identification Program (CIP) and Customer Due Diligence (CDD) requirements for designated beneficiaries of individual retirement accounts.

In FIN-2024-R001, FinCEN issued a revised response to clarify obligations for broker-dealers that open new accounts for legal entity customers. The ruling was issued in response to a request from a foundation that had been named the beneficiary of an individual retirement account maintained by the broker-dealer. For the foundation to receive the funds, the broker-dealer required the foundation to open a new IRA and submit information required by the broker-dealer's CIP and CDD rules. The foundation asked whether it must comply with identification verification requirements when receiving the distribution of IRA funds inherited as part of a charitable estate.

In the ruling, FinCEN expressed no view on whether the broker-dealer had to open the IRA account to pass the funds to the foundation. It did, however, confirm that, in order to open an account, the broker-dealer would be required to comply with CIP and CDD rules imposed under FinCEN regulations.

03/15/2024

Swiss global banking group settles with OFAC

OFAC has announced a settlement with EFG International AG, a Switzerland-based global private banking group. EFG has agreed to pay $3,740,442 to settle its potential civil liability for processing 873 securities transactions in apparent violation of the Cuban Asset Control Regulations, the Kingpin Act, and Executive Order 14024. The settlement amount reflects OFAC’s determination that EFG’s apparent violations were voluntarily self-disclosed and were non-egregious. Further details are available in OFAC's enforcement release.

03/15/2024

Fed and OCC fine JPMorgan Chase $348.2M for inadequate monitoring

The Federal Reserve Board yesterday announced it has issued an enforcement action against JPMorgan Chase & Co., and fined the firm approximately $98.2 million for an inadequate program for monitoring firm and client trading activities for market misconduct. The Board's action requires JPMorgan Chase to review and take corrective action to address the firm's inadequate monitoring practices, which occurred between 2014 and 2023.

The Board's action was taken in coordination with the Office of the Comptroller of the Currency. The penalties announced by the Board and the Office of the Comptroller of the Currency total approximately $348.2 million.

The OCC's assessment of a $250 million civil money penalty against JPMorgan Chase Bank, N.A. was also announced yesterday. The OCC reported it found that the bank operated with gaps in trading venue coverage and without adequate data controls required to maintain an effective trade surveillance program.

Generally, trading venues are systems or electronic platforms, operated by investment firms or market operators, that bring together multiple third party buying or selling interests in financial instruments to perform a transaction. The OCC expects banks to perform trade surveillance to monitor the market conduct of its traders and clients as part of its market conduct risk control framework. The OCC found that the bank failed to surveil billions of instances of trading activity on at least 30 global trading venues. These gaps and deficiencies in the bank’s trade surveillance program constitute unsafe or unsound banking practices.

03/14/2024

U.S. targets Republika Srpska officials

Yesterday, the Treasury Department reported that OFAC had designated three individuals who have contributed to Specially Designated National (SDN) and Republika Srpska President Milorad Dodik’s efforts to undermine the peace and stability of Bosnia and Herzegovina (BiH) by organizing and executing the commemoration of “Republika Srpska Day” on January 9, 2024, an activity determined to be unconstitutional in BiH. These individuals facilitated Dodik’s efforts to undermine the Dayton Peace Agreement and the authority of the BiH Constitutional Court and the High Representative.

For the names and identification information of the designated individuals, see yesterday's BankersOnline OFAC Update.

03/13/2024

U.S. targets Al-Ashtar Brigades operatives

The Treasury Department yesterday reported that OFAC has acted in coordination with the Kingdom of Bahrain against key Iran-based operatives and a financial facilitator for designated terrorist group Al-Ashtar Brigades. The Department of State designated Al-Ashtar Brigades as a Foreign Terrorist Organization and a Specially Designated Global Terrorist in 2018.

For the names and identification information of the designated individuals, see yesterday's BankersOnline OFAC Update.

03/12/2024

Appeal filed in Corporate Transparency Act case

FinCEN has reported that the Government has filed a Notice of Appeal in National Small Business United v. Yellen. The appeal was filed with the U.S. Court of Appeals for the Eleventh Circuit.

03/12/2024

U.S. targets transnational al-Shabaab money laundering network

The Treasury Department has reported that OFAC has imposed sanctions on 16 entities and individuals who compose an expansive business network spanning the Horn of Africa, the United Arab Emirates (UAE), and Cyprus that raises and launders funds for al-Shabaab, a terrorist group affiliated with al-Qa’ida. Individuals within this network include influential businesspeople in the region that lend financial backing to al-Shabaab, a terrorist group responsible for some of the worst terrorist attacks in East Africa’s modern history. These attacks have claimed the lives of thousands of innocent civilians. These individuals and entities were designated pursuant to Executive Order 13224, as amended, which targets terrorist groups and their enablers.

For the names and identification information of the designated parties, see yesterday's BankersOnline OFAC Update.

03/11/2024

Fed finalizes rule for financial market utilities

The Federal Reserve Board has announced it has approved a final rule that updates risk management requirements for certain systemically important financial market utilities (FMUs) supervised by the Board. FMUs provide essential infrastructure to clear and settle payments and other financial transactions to allow financial markets and the broader economy to function effectively.

The final updates provide additional clarity and specificity to existing requirements in four key areas of operational risk management: incident management and notification; business continuity management and planning; third-party risk management; and review and testing of operational risk management measures. For example, the updates explicitly require FMUs to establish an incident management framework and emphasize the need for FMUs to continue to advance their cyber resilience capabilities.

The final updates are substantively similar to the proposal and largely consistent with existing measures that FMUs take to comply with the current requirements.

FMUs subject to the rule must be in compliance with certain updates by 90 days and all updates by 180 days after publication in the Federal Register.

03/08/2024

FTC issues extends telemarketing fraud protections to businesses

The Federal Trade Commission has announced a final rule extending telemarketing fraud protections to businesses and updating the rule’s recordkeeping requirements in light of developments in technology and the marketplace. The Commission also announced a proposed rule that would provide the agency with significant new tools to combat tech support scams.

The final rule will be effective 30 days after publication in the Federal Register with compliance with one provision delayed until 180 days after publication.

There will be a 60-day comment period on the proposed rule following its Federal Register publication.

03/08/2024

Trade groups sue CFPB to stop credit card late fees rule

The U.S. Chamber of Commerce announced it has filed a lawsuit in the U.S. District Court for the Northern District of Texas, Fort Worth Division seeking a preliminary injunction to stop the Consumer Financial Protection Bureau (CFPB) from implementing its rule to limit credit card late fees, arguing that the CFPB not only exceeded its statutory authority but did so by relying on the use of secret data collected for an unrelated purpose.

The Chamber and co-plaintiffs Fort Worth Chamber of Commerce, Longview Chamber of Commerce, American Bankers Association, Consumer Bankers Association, and Texas Association of Business, allege that the CFPB—

  • Violated the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) by preventing issuers from collecting reasonable and proportional late fees when cardholders do not pay their bills on time;
  • Violated the Administrative Procedures Act (APA) by promulgating a final rule that is arbitrary and capricious, relying on secret data collected from only the largest banks for a different purpose and by a different agency; and
  • Issued the rulemaking with funds drawn in violation of the U.S. Constitution's Appropriations Clause.

The plaintiffs also filed a motion for a preliminary injunction that would bar the CFPB from enforcing, applying, or implementing the final rule, and a brief in support of that motion.

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