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Top Story Compliance Related

01/29/2020

OCC workshops in DC

The OCC reports it will host two workshops at OCC Headquarters in Washington, D.C., March 17 and 18, for directors of national community banks and federal savings associations.

  • The Risk Governance workshop on March 17 provides practical information for directors to effectively measure and manage risks. The workshop also focuses on the OCC’s approach to risk-based supervision and major risks in the financial industry.
  • The Compliance Risk workshop on March 18 focuses on the critical elements of an effective compliance risk management program, and on major compliance risks and critical regulations. Topics of discussion include the Bank Secrecy Act, Flood Disaster Protection Act, Fair Lending, Home Mortgage Disclosure Act, Community Reinvestment Act, and other compliance hot topics.

Each workshop is limited to the first 35 registrants, and there is a $99 fee. Online registration is available.

01/28/2020

IRS guidance on reporting mortgage insurance on Form 1098

The Internal Revenue Service has issued new guidance involving the deductibility of mortgage insurance premiums (MIP) for tax years 2018 through 2020. Recipients of mortgage payments who report mortgage interest payments on Form 1098 should also report MIP aggregating $600 or more received during the calendar year.

Lenders are not required to file or furnish corrected Forms 1098 for 2018 to report MIP for that year. However, the IRS encourages them to make that information available to borrowers so that they can decide whether to amend their 2018 income tax returns to claim the additional deduction. The IRS strongly recommends that lenders file corrected Forms 1098 for 2018 to report the MIP, as this will help substantiate the deductions and avoid IRS inquiries about any deduction that does not match the information return filed with the IRS.

For tax year 2019, Forms 1098 should be filed and furnished according to the usual due dates and include MIP in box 5. If a lender has already furnished the borrower statement without reporting MIP, it should send a corrected statement. Requests for extensions to file or furnish Forms 1098 should be submitted according to the specifications in the General Instructions for Certain Information Returns.

For tax year 2020, lenders should report MIP in box 5 and file and furnish Forms 1098 according to the specifications in the Instructions for Form 1098 and the General Instructions for Certain Information Returns

01/28/2020

Shipping company pays $1.125M to settle OFAC violations

OFAC has announced that Eagle Shipping International (USA) LLC, a Marshall Islands company with its headquarters in Stamford, Connecticut, has agreed to pay $1,125,000 to settle its potential civil liability for 36 apparent violations of the Burmese Sanctions Regulations. The alleged violations involve Eagle Shipping’s dealings in the property interests of Myawaddy Trading Limited, which at all relevant times was identified on OFAC’s SDN list, and the provision of transportation services from Burma to Singapore for a land reclamation project for the benefit of Myawaddy, in apparent violation of the regulations.

01/27/2020

CFPB clarifies stance on 'abusiveness' standard

The Consumer Financial Protection Bureau issued a policy statement Friday providing a common-sense framework on how it intends to apply the "abusiveness" standard in supervision and enforcement matters. Commencing immediately, the Bureau intends to apply the following principles during supervision and enforcement work by:

  • Focusing on citing or challenging conduct as abusive in supervision and enforcement matters only when the harm to consumers outweighs the benefit
  • Generally avoiding "dual pleading" of abusiveness and unfairness or deception violations arising from all or nearly all the same facts, and alleging "stand alone" abusiveness violations that demonstrate clearly the nexus between cited facts and the Bureau’s legal analysis
  • Seeking monetary relief for abusiveness only when there has been a lack of a good-faith effort to comply with the law, except the Bureau will continue to seek restitution for injured consumers regardless of whether a company acted in good faith or bad faith

01/27/2020

SEC charges spouses in $1B Ponzi scheme

The SEC has announced it has charged a California-based couple with orchestrating a nearly billion-dollar Ponzi scheme involving alternative energy tax credits. According to the SEC's complaint, Jeffrey and Paulette Carpoff raised approximately $910 million from 17 investors between 2011 and 2018 by offering securities in the form of investment contracts through their two solar generator companies, DC Solar Solutions Inc. and DC Solar Distribution Inc. The Carpoffs allegedly promised investors tax credits, lease payments, and profits from the operation of mobile solar generators. In reality, the complaint alleges, most of the generators were never manufactured, and the vast majority of the purported lease revenue paid to investors in fact came from new investor funds. As part of the scheme, the Carpoffs arranged for investors to receive false documents, including financial statements, lease arrangements, and generator certifications. Throughout the scheme, the Carpoffs allegedly siphoned off investor funds and used at least $140 million of investor money to fund their lavish lifestyle, which included 150 luxury and sports cars, dozens of properties, and a share in a private jet service.

The U.S. Attorney's Office for the Eastern District of California also announced criminal charges against the Carpoffs.

01/27/2020

CFPB policy statement on 'compliance aids'

The CFPB has published [85 FR 4579] a policy statement announcing a new designation for certain Bureau guidance, known as "Compliance Aids," and to explain the legal status and role of guidance with that designation. The designation will be applicable beginning February 1, 2020.

Compliance aids will be similar to previous compliance resources from the Bureau, but will be designated as "Compliance Aids." Some current compliance resources may be so designated when they are updated or reissued. They are not to be considered "rules" under the Administrative Procedures Act. Instead, Compliance Aids present the requirements of existing rules and statutes in a manner that is useful for compliance professionals, other industry stakeholders, and the public. Compliance Aids may also include practical suggestions for how entities might choose to go about complying with those rules and statutes. But they may not address all situations. Where there are multiple methods of compliance that are permitted by the applicable rules and statutes, an entity can make its own business decision regarding which method to use, and this may include a method that is not specifically addressed in a Compliance Aid. Regulated entities are not required to comply with the Compliance Aids themselves. Regulated entities are only required to comply with the underlying rules and statutes.

When exercising its enforcement and supervisory discretion, the Bureau does not intend to sanction, or ask a court to sanction, entities that reasonably rely on Compliance Aids.

01/24/2020

1.7 million fraud reports to FTC in 2019

The Federal Trade Commission has reported it received almost !.7 million fraud reports in 2019, and Commission actions in 2019 resulted in more than $232 million in refunds to consumers. The most common type of fraud reported to the FTC in 2019 was imposter scams; government imposter scams, in particular, were the most frequently reported, and up more than 50 percent since 2018. Of all reports received, the top categories were identity theft, imposter scams, telephone and mobile services, online shopping, and credit bureaus.

01/24/2020

Agencies publish rule on measuring derivatives contracts risk

The Federal Reserve, OCC and FDIC have published [85 FR 4362] their final rule, announced in November, to implement a new approach—the standardized approach for counterparty credit risk (SA-CCR)—for calculating the exposure amount of derivative contracts under these agencies' regulatory capital rule.

01/24/2020

OCC acts against former Wells Fargo Bank management

The OCC announced Thursday it has issued a notice of charges against five former senior executives of Wells Fargo Bank, N.A., Sioux Falls, South Dakota, and announced settlements with the bank’s former Chief Executive Officer (CEO) and other members of the bank’s operating committee. These actions stem from the executive's role in the bank's systemic sale practices misconduct (see "Incentive program costs Wells Fargo $185 M in CMPs," 9/9/2016).

The current or former executives charged and the relief sought by the notice of charges include:

  • Carrie Tolstedt, head of Wells Fargo's Community Bank -- Prohibition order and $25 million civil money penalty (CMP)
  • Claudia Russ Anderson, Community Bank group risk officer -- Prohibition order and $5 million CMP
  • James Strother, general counsel, Cease & Desist (C&D) order and $5 million CMP
  • David Julian, chief auditor -- C&D order and $2 million CMP
  • Paul McLinko, executive audit director -- C&D order and $500,000 CMP

The OCC stated the notice of charges alleges those executives failed to adequately perform their duties and responsibilities, which contributed to the bank’s systemic problems with sales practices misconduct from 2002 until October 2016, and the misconduct of those individuals allowed the practices to continue for years, affecting millions of bank customers and thousands of lower level bank employees. Additionally, the notice states that Ms. Russ Anderson also made false and misleading statements to the OCC and actively obstructed the OCC’s examinations of the bank’s sales practices. Under federal law, each of those individuals may request a hearing challenging the allegations and relief sought.

The OCC's press release also announced it had issued consent orders against three former Wells Fargo executives for their roles in the bank's sales practices misconduct:

for their roles in the bank’s sales practices misconduct.

01/24/2020

Treasury targets network supporting Iran

The Treasury Department has announced that OFAC took action Thursday against four international petrochemical and petroleum companies that have collectively transferred the equivalent of hundreds of millions of dollars’ worth of exports from the National Iranian Oil Company (NIOC), an entity instrumental in Iran’s petroleum and petrochemical industries, which helps to finance Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and its terrorist proxies. Treasury stated that Iran’s petroleum and petrochemical industries are major sources of revenue for the Iranian regime and funds its malign activities throughout the Middle East, and the entities targeted Thursday facilitate Iran’s petrochemical and petroleum exports in contravention of U.S. economic sanctions.

Concurrently with the U.S. Department of Treasury’s designations, the U.S. Department of State designated several companies and senior executives pursuant to E.O. 13846 in connection with significant transactions for the transport of petrochemical products from Iran, on or after November 5, 2018.

All property and interests in property of the persons designated Thursday subject to U.S. jurisdiction are blocked, and U.S persons are generally prohibited from engaging in transactions with them. In addition, foreign financial institutions that knowingly facilitate significant transactions for, or persons that provide material or certain other support to, the persons designated today risk exposure to sanctions that could sever their access to the U.S. financial system or block their property and interests in property under U.S. jurisdiction.

For identifying information on the individuals and entities designated, see BankersOnline's OFAC Update

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