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Top Story Compliance Related


OCC clarifies bank cryptocurrency requirements and trust bank chartering

OCC Chief Counsel's Interpretive Letter #1179 has been published to confirm that national banks and federal savings associations must demonstrate that they have adequate controls in place before they can engage in certain cryptocurrency, distributed ledger, and stablecoin activities. The letter provides a roadmap for banks to engage with their supervisory office to provide written notification of their proposed activities and outlines the criteria that the OCC will follow to evaluate the proposed activity and provide a supervisory non-objection. If the bank receives a supervisory non-objection, the OCC will review these activities as part of its ordinary supervisory processes.

The interpretive letter also clarifies OCC standards for chartering National Trust Banks. The OCC may look to state law to determine if an applicant’s activities are limited to the operations “of a trust company and activities related thereto,” but an applicant’s activities will not automatically be deemed to be trust activities—or to be fiduciary activities—solely by virtue of state law. The OCC retains discretion to determine if an applicant’s activities that are considered trust or fiduciary activities under state law are considered trust or fiduciary activities for purposes of applicable federal law.


2021 CRA software downloads available

Version 2021 for the calendar year 2021 CRA data due March 1, 2022, is now available on the FFIEC's CRA/HMDA Software Downloads webpage. Each software version is year-specific (i.e. 2020 reporting requires 2020 CRA DES and not 2021 CRA DES).


OFAC targets facilitator for ISIS-K

Yesterday, the Treasury Department announced that OFAC had designated Ismatullah Khalozai, an individual who has acted as a financial facilitator for the Islamic State’s Khorasan Province (ISIL-Khorasan), active in Afghanistan and commonly referred to as “ISIS-K.” This individual has provided support to ISIS-K’s operations in Afghanistan by facilitating international financial transactions that fund human trafficking networks and facilitating the movement of foreign fighters who seek to escalate tensions in Afghanistan and the region.

OFAC took this action in coordination with the U.S. Department of State, which yesterday designated Sanaullah Ghafari, Sultan Aziz Azam, and Maulawi Rajab as Specially Designated Global Terrorists (SDGTs) for their roles as leaders of ISIS-K.

For identification information on Khalozai and the individuals designated by the State Department, and other changes in OFAC's SDN List, see the BankersOnline OFAC Update for November 22, 2021.


SEC assesses $18M penalty for compliance failures

The Securities and Exchange Commission has announced that an affiliate of McKinsey & Company that offers investment options exclusively to current and former McKinsey partners and employees has agreed to pay an $18 million penalty for compliance failures.

The SEC’s order finds that the affiliate maintained inadequate policies and procedures to prevent McKinsey partners from misusing material nonpublic information they obtained as consultants to public companies and other McKinsey clients while they were simultaneously overseeing the affiliate’s investment decisions. The SEC’s order finds that McKinsey’s affiliate MIO Partners Inc. was investing hundreds of millions of dollars in companies that McKinsey was advising. Certain McKinsey partners oversaw MIO’s investment choices and also had access to material nonpublic information as a result of their McKinsey consulting work. These partners were routinely privy to confidential information like financial results, planned bankruptcy filings, mergers and acquisitions, product pipelines and funding efforts, and material changes in senior management at those companies.

According to the SEC’s order, MIO did not have reasonably designed policies and procedures to address the dual roles for McKinsey consultants who were involved in MIO’s investment choices. For example, the order cites an instance where a McKinsey partner’s access to confidential information about MIO’s investments in a company through a third-party manager created a risk that one of McKinsey’s units could influence the company’s Chapter 11 reorganization plan in a way that favored MIO’s investment.

The SEC’s order finds that MIO, which is a registered investment adviser and wholly-owned subsidiary of McKinsey, violated Sections 204A and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7. Without admitting or denying the findings, MIO consented to the entry of a cease-and-desist order and a censure, and agreed to pay the $18 million penalty.


OCC enforcement actions

The Office of the Comptroller of the Currency has issued a list of enforcement actions taken in September and October 2021. Among the actions listed were:

  • a Consent Order to cease and desist issued to Cenlar FSB, Ewing, NJ, after the Comptroller found that the bank’s internal controls and risk management practices did not support the current risk profile and size of the Bank’s mortgage sub-servicing portfolio, which is an unsafe or unsound practice.
  • a previously announced Civil Money Penalty order issued to Trustmark National Bank, Jackson, MS
  • an order of prohibition and for payment of a $75,000 civil money penalty was issued to Derline Cunningham, former retail branch manager and officer of Citizens Bank, N.A., Providence, RI, for unspecified infractions
  • an order of prohibition was issued to Addisha Jackson, a former customer service representative at JPMorgan Chase Bank, N.A., Columbus, OH, for unspecified infractions
  • a formal agreement was entered into with The Federal Savings Bank, Chicago, IL, for unsafe or unsound practices, including those relating to: (i) risk management; (ii) the Bank’s consumer compliance program and violations of law, rule, or regulation, including those relating to the Real Estate Settlement Procedures Act, and the Truth in Lending Act; and (iii) compliance with the Bank Secrecy Act.


Bureau reminder to debt collectors

The CFPB has emailed a reminder concerning a provision of Regulation F implementing the Fair Debt Collection Practices Act. Under the regulation, debt collectors who adopt and follow certain procedures can obtain a bona fide error defense from civil liability for unintentional violations of the prohibition against third-party communications when communicating by email or text message. For text message communications, one element of those procedures includes using a “complete and accurate database” to confirm that the consumer’s telephone number has not been re-assigned to another user.

The Rule’s commentary identifies the FCC’s Reassigned Numbers Database as a “complete and accurate database.” The FCC has now published that database, which is available at More information about the Reassigned Numbers Database is available at


FinCEN notice on environment crimes and financial activity

On Thursday, FinCEN issued Notice FIN-2021-NTC4, "FinCEN Calls Attention to Environmental Crimes and Related Financial Activity," to call attention to an upward trend in environmental crimes and associated illicit financial activity.

FinCEN is highlighting this trend because of: (1) its strong association with corruption and transnational criminal organizations, two of FinCEN’s national anti-money laundering and countering the financing of terrorism (AML/CFT) priorities; (2) a need to enhance reporting and analysis of related illicit financial flows; and (3) environmental crimes’ contribution to the climate crisis, including threatening ecosystems, decreasing biodiversity, and increasing carbon dioxide in the atmosphere. The Notice provides financial institutions with specific suspicious activity report (SAR) filing instructions and highlights the likelihood of illicit financial activity related to several types of environmental crimes.


SEC proposes amendments to proxy voting advice rules

The Securities and Exchange Commission on Wednesday voted to propose amendments to its rules governing proxy voting advice. The proposed amendments aim to address concerns expressed by investors and others that the current rules may impede and impair the timeliness and independence of proxy voting advice and subject proxy voting advice businesses to undue litigation risks and compliance costs.

The proposed amendments would rescind two rules applicable to proxy voting advice businesses that the Commission adopted in 2020. Specifically, the Commission is proposing to rescind conditions to the availability of two exemptions from the proxy rules’ informational and filing requirements on which proxy voting advice businesses often rely. Those conditions require that: (1) registrants that are the subject of proxy voting advice have such advice made available to them in a timely manner, and (2) clients of proxy voting advice businesses are provided with a means of becoming aware of any written responses by registrants to proxy voting advice. Investors and others have expressed concerns that these conditions will impose increased compliance costs on proxy voting advice businesses and impair the independence and timeliness of their proxy voting advice.

The proposed amendments also would rescind the 2020 changes made to the proxy rules’ liability provision. Although the changes were intended to make clear that proxy voting advice is subject to liability under the proxy rules, investors and others have expressed concerns that the 2020 changes have created confusion, increased proxy voting advice businesses’ litigation risks, and potentially impair the independence and quality of the proxy voting advice.

The proposal will have a 30-day public comment period following its publication in the Federal Register.


SEC adopts new proxy card rules in contested director elections

The Securities and Exchange Commission voted Wednesday to adopt final rules requiring parties in a contested election to use universal proxy cards that include all director nominees presented for election at a shareholder meeting. The rule changes will give shareholders the ability to vote by proxy for their preferred combination of board candidates, similar to voting in person.

The final rules will require dissident shareholders and registrants to provide shareholders with a proxy card that includes the names of all registrant and dissident nominees. The rules will apply to all non-exempt solicitations for contested elections other than those involving registered investment companies and business development companies. The rules will require registrants and dissidents to provide each other with notice of the names of their nominees, establish a filing deadline and a minimum solicitation requirement for dissidents, and prescribe presentation and formatting requirements for universal proxy cards.

The final rules will be published in the Federal Register. To facilitate transition to the new rules, compliance with the rules related to universal proxy cards will be required for any shareholder meeting involving contested director election held after August 31, 2022.


FinCEN Exchange on environmental crimes and related financial activity

On Tuesday, FinCEN convened a virtual FinCEN Exchange focused on identifying and combatting illicit financial flows associated with environmental crimes and related money laundering. Representatives from financial institutions, law enforcement, and Federal government agencies attended the session.

Topics discussed included illicit financial flows related to wildlife trafficking, illegal logging, illegal fishing, illegal mining, and waste and hazardous substances trafficking, and possible solutions for better understanding the related illicit flows.

FinCEN is focusing on environmental crimes because of an upward trend in these activities and their related financial flows; their strong association with two of FinCEN’s national anti-money laundering and countering the financing of terrorism (AML/CFT) priorities, specifically corruption and transnational criminal organizations; and their contribution to the climate and biodiversity crises. The Financial Action Task Force has estimated that global environmental crimes generate hundreds of billions in illicit proceeds annually. These crimes frequently and increasingly involve transnational organized crime and corruption, and are often associated with a variety of other crimes including money laundering, bribery, theft, forgery, tax evasion, fraud, human trafficking, and drug trafficking.


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