Top Story Compliance Related

The CFPB announced on Wednesday it has taken action against two American Express banking subsidiaries for discriminating against consumers in Puerto Rico, the U.S. Virgin Islands, and other U.S. territories by providing them with credit and charge card terms that were inferior to those available in the 50 states and for discriminating against certain consumers with Spanish-language preferences. American Express has paid about $95 million in redress to approximately 222,000 consumers during the reviews undertaken by the Bureau and American Express, and the Bureau is now ordering the company to pay at least another $1 million to complete the compensation of harmed consumers.

American Express self-reported differences between its cards issued to consumers in Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and Northern Mariana Islands, and its cards offered in the 50 U.S. states, as well as differences with respect to certain consumers with a Spanish language preference. The Bureau did not find that American Express intentionally discriminated against its customers, but rather found that the differences resulted from the company's card management structure, which involved different business units overseeing the U.S. cards and cards issued in Puerto Rico and the Virgin Islands.

No civil money penalties were imposed in the Bureau's order because American Express self-reported the violations, self-initiated remediation for harmed consumers, and fully cooperated with the Bureau's review and investigation.

• Consent order in the Matter of American Express Centurion Bank and American Express Bank, FSB.

The FTC has announced the agenda for its joint conference on protecting military consumers scheduled from 9:00 am to 1 pm on September 7, 2017, at the Los Angeles Police Department Headquarters, 100 W. 1st Street, in Los Angeles.

The FRB, FDIC, and OCC have issued a joint press release on a proposal to extend certain capital rule transitions. The proposal would extend the existing transitional capital treatment for certain regulatory capital deductions and risk weights. The extension would apply to banking organizations that are not subject to the agencies' advanced approaches capital rules. The agencies are proposing the extension because they expect to soon issue a separate proposal to simplify the regulatory treatment of the items for which the extension is now proposed. A 30-day comment period will begin on publication of the current proposal in the Federal Register.
UPDATE: Published at 82 FR 40495, with comment period ending 9/25/2017.

Treasury's Office of Foreign Assets Control announced on Tuesday it has designated ten entities and six individuals in response to North Korea’s ongoing development of weapons of mass destruction (WMD), violations of United Nations (UN) Security Council Resolutions, and attempted evasion of U.S. sanctions. The new designations target third-country companies and individuals that assist already-designated persons who support North Korea’s nuclear and ballistic missile programs; deal in the North Korean energy trade; facilitate its exportation of workers; and enable sanctioned North Korean entities to access the U.S. and international financial systems.

As a result of Tuesday’s action, any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked, and U.S. persons are generally prohibited from dealing with them. For identification of the new designations, along with a number of removals from and updates to the OFAC SDN lists, see our OFAC Update.

The Federal Reserve Board and the Texas Department of Savings and Mortgage Lending have issued a Consent Cease and Desist Order to The Bank & Trust, S.S.B., of Del Rio, Texas, following a joint examination of the bank in which the Board and Department identified "significant deficiencies in the Bank’s risk management and compliance with applicable laws, rules, and regulations relating to anti-money laundering (“AML”), including the Bank Secrecy Act; the rules and regulations issued thereunder by the U.S. Department of the Treasury; and the AML requirements of Regulation H of the Board."

FinCEN has announced it has issued revised Geographic Targeting Orders (GTOs) covering certain "all cash" high-end residential real estate purchase activity from September 22, 2017, through March 20, 2018, inclusive. The order requires title insurance companies and their subsidiaries and agents to file specially-completed Form 8300 reports for a residential real estate purchase by a legal entity without a bank loan or similar external financing, made in whole or in part with currency, a cashier's check, a certified check, a traveler's check, a personal check, a business check, or any form of money order, or a funds transfer. Reportable purchases will be those for a total purchase price designated trigger amounts or more in—

• Bexar County, Texas ($500,000 or more);
• County of Miami-Dade, Broward or Palm Beach in Florida ($1 million or more);
• Borough of Brooklyn, Queens, Bronx, or Staten Island, New York City ($1.5 million or more);
• County of San Diego, Los Angeles, San Francisco, San Mateo or Santa Clara, California ($2 million or more);
• Borough of Manhattan, New York City, or City and County of Honolulu, Hawaii ($3 million or more).

FinCEN also published Advisory FIN-2017-A003 to provide financial institutions and the real estate industry with information on the money laundering risks associated with real estate transactions, including those involving luxury property purchased through shell companies, particularly when conducted without traditional financing. Such transactions are vulnerable to abuse by criminals seeking to launder illegal proceeds and mask their identities. The Advisory provides information on how to detect and report these transactions to FinCEN.

From information obtained during earlier impositions of similar GTOs, FinCEN learned that about 30 percent of reported transactions involved a beneficial owner or purchaser representative (for the purchasing entity) that was also the subject of a previous suspicious activity report. An FAQ on the GTOs was also released.

The OCC has issued its August report of enforcement actions taken against national banks, federal savings associations and individuals currently or formerly affiliated with such institutions. This release included two cease and desist orders, two civil money penalty (CMP) orders, three formal agreements, one removal/prohibition order, one restitution order, and five terminations of existing enforcement actions. Notable were a $1.5 million civil money penalty order, order to cease and desist, and order for restitution issued to UMB Bank, N.A., Kansas City, Missouri, for billing practices related to an identity protection product. There was also a $10,000 personal civil money penalty against the president and director of a federal savings bank in Leavenworth, Kansas, for violations of Regulation O, and putting his relationship with a former employee ahead of his fiduciary duty to the bank.

OFAC has designated two individuals and added them to its SDN List as Specially Designated Global Terrorists with links to the Islamic State of Iraq and the Levant (ISIL). For identification details, see our OFAC Update.

The CFPB announced Thursday it has filed a complaint and proposed settlement against Aequitas Capital Management, Inc. and related entities, for aiding the Corinthian Colleges’ predatory lending scheme. The CFPB alleges that Aequitas enabled Corinthian to make high-cost private loans to Corinthian students so that it would seem as if the school was making enough outside revenue to meet the requirements for receiving federal student aid dollars. The risky loans saddled students with high-priced debt that both Aequitas and Corinthian knew students could not afford. Under the CFPB’s proposed settlement, if approved, about 41,000 Corinthian students could be eligible for approximately $183.3 million in loan forgiveness and reduction. In collaboration with the CFPB, several state attorneys general have also reached proposed settlements with Aequitas.

The Bureau reports that, on March 10, 2016, the Securities and Exchange Commission took action against Aequitas, alleging they had defrauded more than 1,500 investors. A receiver was appointed to wind down Aequitas and distribute its remaining assets.

OFAC has reported that Blue Sky Blue Sea, Inc., doing business as American Export Lines and International Shipping Company (USA), of Los Angeles, California, has agreed to pay $518,063 to settle potential civil liability for 140 apparent violations of the Iranian Transactions and Sanctions Regulations during 2012. According to OFAC the company did not self-report the apparently non-egregious violations. For further information, see our Penalty page.