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Top Story Compliance Related

11/20/2020

Entities exporting forced North Korean labor sanctioned

Treasury has announced that OFAC has imposed sanctions on two entities involved in the exportation of forced labor from North Korea. Mokran LLC, a Russian construction company, and Korea Cholsan General Trading Corporation, a North Korean company operating in Russia, were targeted for having engaged in, facilitated, or been responsible for the exportation of forced labor from North Korea, including exportation to generate revenue for the Government of North Korea or Workers’ Party of Korea. In addition, current SDN listings for Korea Rungrado General Trading Corporation, Korea General Corporation for External Construction, and Yanbian Silverstar Network Technology Co., Ltd were updated.

For further identification information on these entities and on updated listing on an individual previously sanctioned under Syria-related regulations, see BankersOnline's OFAC Update.

11/20/2020

FDIC updates RMS Manual

The FDIC has issued a November 2020 update to its Risk Management Manual of Examination Policies (RMS Manual). The November updates were made to section 3.2 (Loans) of the Manual, and include revised instructions for assessing environmental risk programs; updated residential appraisal thresholds; including effective dates for lease accounting; instructions on assessing bank-to-bank credit; assessing payday lending programs; Current Expected Credit Loss (CECL) updates; and other minor technical edits.

With the issuance of the November updates, the FDIC has moved to inactive status FIL-14-2005 (Payday Lending Programs Revised Examination Guidance), and FIL-52-2015 (FDIC Clarifying its Approach to Banks Offering Products and Services, such as Deposit Accounts and Extensions of Credit, to Non-Bank Payday Lenders). Also, the Guidelines for an Environmental Risk Program are being removed from the FDIC Statements of Policy section of the FDIC Law, Regulations, and Related Acts webpage. The two FILs and the Guidelines document are addressed in the RMS Manual.

The RMS Manual can be downloaded as ZIP files.

11/19/2020

Final Capital Rule for Fannie and Freddie

The Federal Housing Finance Agency (FHFA) has announced it has approved a final rule that establishes a new regulatory capital framework for Fannie Mae and Freddie Mac (the Enterprises).

The final rule fulfills Congress's Housing and Economic Recovery Act of 2008 mandate that FHFA establish risk-based capital requirements for the Enterprises. The rule is intended to ensure the safety and soundness of the Enterprises by increasing the quantity and quality of the Enterprises' regulatory capital and reducing the pro-cyclicality of the aggregate capital requirements. A Fact Sheet on the rule was also released.

The rule will become effective 60 days after publication in the Federal Register.

11/19/2020

OFAC targets broad Iran patronage network

On Wednesday, the Treasury Department announced that OFAC had acted against a key patronage network for the Supreme Leader of Iran, the Islamic Revolution Mostazafan Foundation (Bonyad Mostazafan, or the Foundation), an immense conglomerate of some 160 holdings in key sectors of Iran’s economy, including finance, energy, construction, and mining.

OFAC also designated Iran’s Minister of Intelligence and Security, Mahmoud Alavi, pursuant to human rights authorities.

See BankersOnline's OFAC Update for identity information on the nine individuals, 49 entities, and one vessel added to OFAC's SDN List, along with four previous designations updated, in yesterday's OFAC action.

11/19/2020

Unchanged thresholds for Regs M and Z

The Consumer Financial Protection Bureau and the Board of Governors of the Federal Reserve System have announced that the dollar thresholds for exemptions from coverage in section 1013.2(e) of Regulation M (Consumer Leasing), section 226.3(b) of the Board's Regulation Z (Truth in Lending), and section 1026.3(b) of the Bureau's Regulation Z (Truth in Lending) will remain unchanged at $58,300 for calendar year 2021.

The BankersOnline pages for sections 1013.2 and 1026.3 of Bureau regulations M and Z have been updated.

11/18/2020

New Venezuela-related general license issued

OFAC has issued Venezuela-related General License 8G, "Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities."

OFAC also designated two individuals as Specially Designated Global Terrorists. See this BankersOnline OFAC Update for identity information.

11/17/2020

OCC updates licensing requirements

The OCC has released a final rule updating and clarifying licensing policies and procedures. The final rule makes various changes to the OCC’s Rules, Policies, and Procedures for Corporate Activities, (12 CFR part 5), including eliminating unnecessary requirements consistent with safe, sound, and fair operation of the federal banking system. It is part of the OCC’s continual effort to modernize its rules and reduce unnecessary regulatory burden.

The rule makes the following changes, among others:

  • Makes the definition of “well managed” consistent for all filing types.
  • Eliminates the filing requirement for FSAs that adopt without change the OCC’s model or optional bylaws.
  • Adds numerous provisions to 12 CFR 5.33 permitting national banks and FSAs to elect to follow the procedures applicable to state banks or state savings associations, respectively, for certain business combinations.
  • For operating subsidiaries:
    • Permits an eligible operating subsidiary of a qualifying national bank or FSA to engage in an activity that is substantively the same as a previously approved bank or FSA activity, respectively, by filing a notice with the OCC (national banks) or an application through expedited review (FSAs).
    • Removes the annual national bank operating subsidiary reporting requirement.
  • For non-controlling investments by a national bank and pass-through investments by an FSA:
    • With prior OCC approval, permits investments in enterprises that have not agreed to OCC supervision.
    • Provides an expedited review procedure for these investments under certain conditions.
    • Expands the investments eligible for notice.
    • Permits investments without a filing in enterprises conducting activities limited to those previously reported by the national bank or FSA in a previous non-controlling investment or pass-through investment filing.
  • Provides procedures for granting and revoking citizenship and residency waivers for national bank directors.
  • Permits national banks to request approval for a reduction in capital over more than four quarters.
  • Changes the definition of “troubled condition” for purposes of changes in directors and senior executive officers to align with OCC supervisory practices. The updated definition specifies that an enforcement action (a cease-and-desist order, consent order, or formal written agreement) must require the national bank or FSA to improve its financial condition for it to be considered in “troubled condition” solely as a result of the enforcement action.

Conforming changes to 12 CFR parts 3 and 7 are also made. The final rule is effective January 1, 2021, except for a change to paragraph 5.20(e)(2) relating to the OCC's taking into account a proposed insured national bank's or FSA's description of how it will meet its CRA objectives, which will be effective on publication of the final rule.

11/16/2020

Former Wells CEO and chairman charged by SEC

The SEC has charged former Wells Fargo & Company CEO and Chairman John G. Stumpf and former head of Wells Fargo’s Community Bank Carrie L. Tolstedt for their roles in allegedly misleading investors about the success of the Community Bank, Wells Fargo’s core business. The SEC’s filings include settled charges against Stumpf, who agreed to pay a $2.5 million penalty, and a litigated action alleging Tolstedt committed fraud.

According to the SEC’s complaint against Tolstedt, from mid-2014 through mid-2016, Tolstedt publicly described and endorsed Wells Fargo’s “cross-sell metric” as a means of measuring Wells Fargo’s financial success despite the fact that this metric was inflated by accounts and services that were unused, unneeded, or unauthorized. The complaint further alleges that Tolstedt signed misleading sub-certifications as to the accuracy of Wells Fargo’s public disclosures when she knew or was reckless in not knowing that statements in those disclosures regarding Wells Fargo’s cross-sell metric were materially false and misleading.

An SEC order against Stumpf finds that in 2015 and 2016 he signed and certified statements filed with the Commission, which he should have known were misleading, regarding both Wells Fargo’s Community Bank cross-sell strategy and its reported metric. According to the order, Stumpf failed to ensure the accuracy of his certifications after being put on notice that Wells Fargo was misleading the public about the cross-sell metric.

11/13/2020

FDIC amends branch application requirements

The FDIC has published [85 FR 72551] a final rule to amend its application requirements for the establishment and relocation of branches and offices so that such applications no longer require statements regarding the compliance of such proposals with the National Historic Preservation Act of 1966 and the National Environmental Policy Act of 1969. The final rule amends the FDIC's regulations to remove those requirements embedded in its branch application procedures, and rescinds related FDIC statements of policy, consistent with branch application procedures for national banks and insured state member banks supervised by the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System.

The amendments become effective December 14, 2020.

11/13/2020

Debt Collector pays $500,000 for reporting violations

The CFPB has announced a settlement with Afni, Inc.to address its violations in providing information to consumer reporting agencies. Afni is a non-bank Illinois-based debt collector that specializes in collecting debt on behalf of telecommunications companies and furnishes information to consumer reporting agencies about consumers’ credit. The consent order requires Afni to take certain steps to prevent future violations and imposes a $500,000 civil money penalty.

Details of Afni's violations and a link to the Bureau's consent order can be found in BankersOnline's penalty page, "Afni, Inc. pays $500K for FCRA violations."

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