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Top Story Compliance Related

11/23/2020

FDIC proposes temporary rule to temper CECL transition effect

FDIC FIL-107-2020, issued November 20, 2020, announces an FDIC proposed rulemaking that would address the temporary deposit insurance assessment effects resulting from certain optional regulatory capital transition provisions relating to the implementation of the current expected credit losses (CECL) methodology. The proposal would remove the double counting of a specified portion of the CECL transitional amount or the modified CECL transitional amount, as applicable, in the calculation of certain financial measures that are used to determine assessment rates for large and highly complex insured depository institutions (IDIs).

The proposal would affect only those institutions with $10 billion or more in total assets. In order to implement these adjustments, the proposal would require large and highly complex IDIs that elect a CECL transition provision to report one additional, temporary item on the Consolidated Reports of Condition and Income (Call Report).

Comments on the proposed rule will be accepted for 30 days after publication in the Federal Register.

11/23/2020

CFPB settles deceptive sales practice case

The Bureau has announced it has issued a consent order against U.S. Equity Advantage, Inc. (“USEA”), a nonbank located in Orlando, Florida, and its owner, Robert M. Steenbergh. The Bureau found that the company’s disclosures and advertisements of its auto loan payment program contained misleading statements in violation of the Consumer Financial Protection Act of 2010’s prohibition against deceptive acts or practices.

The consent order imposes a judgment against them requiring them to pay $9,300,000 in consumer redress and contains requirements to prevent future violations. The ordered redress amount was suspended upon payment of $900,000 and a $1 civil money penalty to the Bureau. The suspension of the full payment for redress, as well as the $1 civil penalty, is based on USEA’s and Steenbergh’s demonstrated inability to pay more based on sworn financial statements.

11/23/2020

OCC proposes Fair Access to Financial Services Rule

The OCC has issued a proposed rule that would ensure fair access to banking services provided by national banks, federal savings associations, and federal branches and agencies of foreign bank organizations.The proposal would codify more than a decade of OCC guidance stating that banks should provide access to services, capital, and credit based on the risk assessment of individual customers, rather than broad-based decisions affecting whole categories or classes of customers.

The proposal would apply to the largest banks in the country that may exert significant pricing power or influence over sectors of the national economy and would require a covered bank to ensure it makes its products and services available to all customers in the community it serves, based on consideration of quantitative, impartial, risk-based standards established by the bank. Under the proposal, a covered bank’s decision to deny services based on an objective assessment of the person’s creditworthiness, ability to pay, or other quantitative, impartial, risk-based reasons would not violate the bank’s obligation to provide fair access. However, under the proposal, the bank may not deny a customer service to disadvantage, limit, or prevent the customer from entering or competing in a market or business segment, or to benefit another person or business activity.

A bank would be presumed not to meet the definition of a bank covered by the proposed rule if it has less than $100 billion in total assets.

Comments on the proposal will be accepted through January 4, 2021.

11/23/2020

Temporary reporting relief for community banks

The Federal Reserve Board, FDIC, and OCC have announced an interim final rule that provides temporary relief for certain community banking organizations related to certain regulations and reporting requirements as a result, in large part, of their growth in size from the coronavirus response.

Community banking organizations are subject to different rules and requirements based on their risk profile and asset size. Due to participating in federal coronavirus response programs—such as the Paycheck Protection Program—and other lending that supports the U.S. economy, many community banking organizations have experienced rapid and unexpected increases in their sizes, which are generally expected to be temporary. The temporary increase in size could subject community banking organizations to new regulations or reporting requirements. Community banking organizations with under $10 billion in assets may have fewer resources available to prepare and comply with previously unanticipated regulatory requirements, especially during a time of economic disruption.

With regard to the requirements covered by the interim final rule, community banking organizations that have crossed a relevant threshold generally will have until 2022 to either reduce their size, or prepare for new regulatory and reporting standards. The rule applies to community banking organizations and financial institutions with less than $10 billion in total assets as of December 31, 2019. The rule will be effective immediately upon publication in the Federal Register. Comments on the interim final rule will be accepted for 60 days following publication.

11/20/2020

OCC enforcement orders

The OCC has released a list of enforcement actions against national banks, federal savings associations and individuals now or formerly affiliated with such institutions.

  • First Abu Dhabi Banks USA N.V. was assessed a $5 million civil money penalty for BSA/AML compliance program deficiencies and violations. An earlier consent order against the bank was terminated.
  • A former director and the former senior compliance and BSA officer of a New Jersey bank were assessed penalties totaling $39,000 (and the compliance/BSA officer was issued a prohibition order) for their involvement in the bank's seriously deficient BSA/AML compliance program while the bank's management was soliciting high-risk businesses as customers.
  • A former senior vice president of a Sallisaw, Oklahoma, bank was issued a default order with an order of prohibition, a cease and desist order requiring restitution of $2.3 million, and civil money penalty of $250,000. The order indicates it has been appealed to a federal court.
  • The former VP of commercial lending and chief lending officer of a Charleroi, Pennsylvania, bank has been issued a consent order to cease and desist and to pay a $12,000 civil money penalty, for inappropriately approving large overdrafts and waiving overdraft fees; and failing to ensure that the bank's credit underwriting process properly assessed the borrower's ability to repay.

11/20/2020

BSA due diligence for charities and non-profits clarified

The Federal Banking Agencies and FinCEN have issued a joint fact sheet to provide clarity to banks and credit unions on how to apply a risk-based approach to charities and other non-profit organizations. The fact sheet highlights the importance of ensuring that legitimate charities have access to financial services and can transmit funds through legitimate and transparent channels, especially during the current COVID-19 pandemic. It also reminds banks to apply a risk-based approach to customer due diligence requirements when developing the risk profiles of charities and other non-profit customers, and reaffirms that the application of a risk-based approach is consistent with existing customer due diligence and other Bank Secrecy Act/Anti-Money Laundering compliance requirements.

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.

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