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Banker's Toolbox, Inc., leaders in compliance solutions for financial institutions, announced the acquisition of Georgia-based MainStreet Technologies (MST). MST is an industry leader in the loan risk management space. This acquisition adds to a strong and growing portfolio of compliance-related solutions and will continue to enhance the value Banker's Toolbox brings to both their customers and the industry. (Read full press release here.)

Top Stories


Get-rich scheme halted

The Federal Trade Commission reports a federal court, acting on a complaint filed by the Commission and the State of Minnesota, has issued an order temporarily halting the Minnesota-based Sellers Playbook from running a large business opportunity scheme. The complaint alleges that Sellers Playbook lured consumers into buying its expensive “system” by claiming that purchasers were likely to earn thousands of dollars per month selling products on Amazon. The company used false and unsubstantiated claims, such as make “$20,000 a month” and “Potential Net Profit: $1,287,463.38.” Few, if any, consumers achieved such results, and most lost money. According to the FTC and the Minnesota Attorney General’s Office, the defendants, who have no affiliation with, took in more than $15 million from consumers from April 2017 to May 2018. Many consumers paid them more than $32,000.


Fed adopts single-counterparty credit limits rule

The Board of Governors of the Federal Reserve System has published a final rule [83 FR 38460] to establish single-counterparty credit limits for bank holding companies and foreign banking organizations with $250 billion or more in total consolidated assets, including any U.S. intermediate holding company of such a foreign banking organization with $50 billion or more in total consolidated assets, and any bank holding company identified as a global systemically important bank holding company under the Board's capital rules. The rule will become effective October 5, 2018.


FEMA suspending Alabama and South Carolina communities

FEMA has published a rule [83 FR 38264] in today's Federal Register identifying communities in Alabama and South Carolina to be suspended from the National Flood Insurance Program on August 16, 2018, for noncompliance with the floodplain management requirements of the program.

  • AL: Ardmore, Athens, Decatur, Falkville, Hartselle, Huntsville, Limestone County (unincorporated areas), Madison, Madison County (unincorporated areas), Mooresville, Morgan County (unincorporated areas), New Hope, Owens Cross Roads, Priceville, Somerville, Triana, and Trinity
  • SC: Aiken County (unincorporated areas), Jackson, and North Augusta


OFAC adds North Korea related sanctions

OFAC announced additional sanctions related to North Korea on Friday, continuing the enforcement of existing UN and U.S. sanctions. The new sanctions target a Russian bank for knowingly facilitating a significant transaction on behalf of an individual designated for weapons of mass destruction-related activities in connection with North Korea. OFAC also targeted one individual and two entities for facilitating North Korean illicit financial activity. This action reinforces the United States’ ongoing commitments to upholding the decisions of the UN Security Council. For identification information, see our OFAC Update.


Fed announces Outlook Live presentation

The Federal Reserve will present "Complaints as a Supervisory and Risk Management Tool" as part if its Outlook Live webinar series on consumer compliance topics, on Wednesday, August 29, at 2 p.m. EDT. The presentation and Q&A segment will run for a total of one hour, and will summarize what an effective complaints management system looks like. Speakers from the Federal Reserve Banks of San Francisco and Kansas City will discuss how examiners investigate complaints and employ them during risk-focused supervision. They will also explore a complaints management model that incorporates current agency guidance and is scalable for community banks. Registration in advance of the presentation is required.


FDIC publishes Section 19 policy statement

The Federal Deposit Insurance Corporation has published [83 FR 38143] a final revised Statement of Policy for Section 19 of the Federal Deposit Insurance Act. The agency published a notice of proposed changes on January 8. Section 19 generally prohibits from participation in banking of a person convicted of a crime of dishonesty or breach of trust or money laundering or who has entered a pretrial diversion or similar program in connection with the prosecution for such offense.


NCUA Board proposes delay of risk-based capital rule

The NCUA Board approved five items at its August 2 open meeting:

  • A proposed supplemental rule amending the agency’s prompt corrective action regulations to delay the effective date of the risk-based capital rule and raise the asset threshold defining a complex credit union.
  • A $675,000 operating fund budget transfer to pay for cybersecurity improvements and employee relocation costs associated with the agency’s reorganization.
  • Continuation of the current 18 percent annual interest rate limit for loans, except for loans originated under the payday alternative loan program, through March 10, 2020.
  • A final rule creating new suspension and debarment procedures to better protect the federal government’s interest in only doing business with presently responsible contractors.
  • A proposed rule to add specificity and clarity to current regulations covering loans and lines of credit granted to members and to provide credit unions with regulatory relief.


FATF report on financial aspects of human trafficking

The Financial Action Task Force has released a report on the financial flows of human trafficking, which aims to raise awareness about the type of financial information that can identify human trafficking for sexual exploitation or forced labor and to raise awareness about the potential for profit-generation from organ trafficking. An executive summary of the report is also available.


CFPB symposium on access to credit

The Bureau has posted an article announcing the agency will hold "Building a Bridge to Credit Visibility," a day-long symposium, on September 17 from 8:00 a.m to 4:45 p.m ET at its headquarters in Washington, D.C. The event is open to the public but space is limited and an RSVP is required. The event will also be livestreamed.


Treasury sanctions Turkish officials

The Department of the Treasury announced on Wednesday that OFAC has targeted Turkey's Minister of Justice Abdulhamit Gul and Minister of Interior Suleyman Soylu under Executive Order 13818, “Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption,” which builds upon Treasury’s Global Magnitsky Act authorities. In connection with Turkey's detention and continued prosecution of Andrew Brunson, a U.S. citizen and pastor, Gul and Soylu were designated for being leaders of entities that have engaged in, or whose members have engaged in, serious human rights abuse. As a result of OFAC's actions, any property, or interest in property, of both Turkey’s Minister of Justice Abdulhamit Gul and Turkey’s Minister of Interior Suleyman Soylu within U.S. jurisdiction is blocked, and U.S. persons are generally prohibited from engaging in transactions with them.

Identifying information can be found in our OFAC Update.


Wells Fargo to pay $2.09B to settle RMBS misrepresentation allegations

The Justice Department announced on Wednesday that Wells Fargo Bank, N.A. and several of its affiliates will pay a civil penalty of $2.09 billion under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), based on the bank’s alleged origination and sale of residential mortgage loans that it knew contained misstated income information and did not meet the quality that Wells Fargo represented. Justice said that investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in residential mortgage-backed securities (RMBS) containing loans originated by Wells Fargo.

The Justice Department alleged that, "despite its knowledge that a substantial portion of its stated income loans—loans where a borrower simply states his or her income without providing any supporting income documentation—contained misstated income, Wells Fargo failed to disclose this information, and instead reported to investors false debt-to-income ratios in connection with the loans it sold. Wells Fargo also allegedly heralded its fraud controls while failing to disclose the income discrepancies its controls had identified. [Justice] further alleged that Wells Fargo took steps to insulate itself from the risks of its stated income loans, by screening out many of these loans from its own loan portfolio held for investment and by limiting its liability to third parties for the accuracy of its stated income loans." The DOJ announcement said that Wells Fargo sold at least 73,539 stated income loans that were included in RMBS between 2005 to 2007, and nearly half of those loans have defaulted, resulting in billions of dollars in losses to investors. The Wells Fargo settlement resolves the claims made by the government, with no admission of liability.


Guidance on one-time repatriation tax on foreign earnings

Treasury has announced the release of proposed regulations relating to the section 965 transition tax on U.S. multinational companies’ overseas income that is being repatriated under section 965 of the Tax Cuts and Jobs Act. The proposed guidance affects U.S. shareholders with direct or indirect ownership in certain specified foreign corporations, as defined in the new tax code provision. The proposed rules address a one-time transition tax on post-1986, untaxed foreign earnings of specific foreign corporations owned by U.S. shareholders.


July 2018 foreign exchange rates

The Federal Reserve has updated its G.5 Foreign Exchange Rates table with July 2018 data.


August FOMC statement

The Federal Reserve Board has released the August 1, 2018, Federal Open Market Committee statement. Information received since the Federal Open Market Committee met in June indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

The FOMC decided to maintain the target range for the federal funds rate at 1-3/4 to 2 percent and to continue an accommodative monetary policy to support strong labor market conditions and a sustained return to 2 percent inflation.


Dealers charged with altering application info

The Federal Trade Commission announced it has filed a complaint charging four auto dealers operating in Arizona and New Mexico with a range of illegal activities, including falsifying consumers’ income and down payment information on vehicle financing applications and misrepresenting important financial terms in vehicle advertisements. The complaint is the FTC’s first action alleging income falsification by auto dealers.

The Commission charges that, during the sales process, the dealers asked consumers to provide personal information—including name, address, and monthly income—and told consumers they would submit the information to financing companies. According to the complaint, however, in many cases the dealers falsely inflated the numbers, making it appear that consumers had higher monthly incomes than they really did. The dealers often inflated the amount of a consumer’s down payment as well, according to the complaint. As a result, financing companies extended credit to consumers who defaulted at a higher rate than qualified buyers. Many of the affected consumers are members of the Navajo Nation.

The Commission also alleges that representatives of the dealers often prevented consumers from reviewing the income and down payment information on the forms, such as by rushing consumers through the process of reviewing and signing the financing applications, having consumers fill out the forms over the phone, and failing to give them the income and down payment portion of the application before they signed.

The FTC also alleges that the dealers' advertising deceived consumers about the nature and terms of financing or lease offers, advertising discounts and incentives without adequately disclosing limitations or restrictions that would disqualify many customers, and that they posted social media ads that failed to disclose required terms. The dealers are charged with violating the FTC Act, the Truth in Lending Act, and the Consumer Leasing Act. The FTC is seeking an injunction barring the defendants from such practices in the future.


Treasury report on nonbank financials, fintech and innovation

The Treasury Department announced Tuesday it has issued a report identifying improvements to the regulatory landscape that will better support nonbank financial institutions, embrace financial technology, and foster innovation. This is the fourth in a series of reports in response to Executive Order 13772 (February 2017), which called on Treasury to identify laws and regulations that are inconsistent with the Core Principles for financial regulation it set forth.


Treasury sanctions terrorists' financial facilitators

The U.S. Department of the Treasury has announced that its Office of Foreign Assets Control took action Tuesday to disrupt Lashkar-e Tayyiba’s fundraising and support networks by designating two of the group’s financial facilitators, Hameed ul Hassan and Abdul Jabbar, as Specially Designated Global Terrorists. OFAC designated Hassan and Jabbar for acting for or on behalf of Lashkar-e Tayyiba, a terrorist organization based in Pakistan. For identification information on these individuals and one other designated on Tuesday, see our OFAC Update.


OCC to accept applications from fintech companies

As if coordinated with the Treasury Department's Tuesday release of a report that encourages the Office of the Comptroller of the Currency to "further develop its special purpose national bank charter, previously announced in December 2016" [see the Top Story], the OCC has announced [News Release 2018-74] it will begin accepting applications for special purpose national bank charters from nondepository financial technology (fintech) companies engaged in the business of banking. The decision was documented in a policy statement and supplement to the OCC’s Comptroller's Licensing Manual, both published Tuesday.

Qualifying fintech companies also may apply for federal charters under the OCC’s authority to charter full-service national banks and other special purpose banks, such as trust banks, banker’s banks, and credit card banks.


NFIP extension passed, sent to White House

The Senate approved on Tuesday the House amendment of S. 1182, now called the "National Flood Insurance Program Extension Act of 2018," and has sent it to the White House for enactment. The bill extends the NFIP, which was scheduled to expire at midnight Tuesday night, for four months, through November 30, 2018.

Update: News sources indicate the president signed the bill into law on Tuesday, soon after the Senate approved it.


OFAC updates Ukraine-/Russia-related general license

OFAC has updated the General Licenses affecting its Ukraine-/Russia-related sanctions program. See our OFAC Update for details.


Detroit CU closes

The NCUA has announced that the Michigan Department of Insurance and Financial Services yesterday liquidated the Greater Christ Baptist Church Credit Union of Detroit and appointed the NCUA as liquidating agent, after determining the credit union was in an an unsafe and unsound condition..The credit union, which served 396 members and had assets of $608,330, is the fourth federally insured credit union liquidated in 2018.


Michigan CU employee barred from industry

The NCUA issued one prohibition order in July. A former employee or institution- affiliated party of a Saginaw, Michigan, credit union, was prohibited from participating in the affairs of any federally insured financial institution.


FTC action stops scam grants scheme

A federal court acting on a complaint filed by the FTC has issued an order halting a telemarketing scheme that took at least $3 million from consumers, including elderly and disabled persons, who sought help with paying personal expenses regarding credit card debits, medical bills, and home repairs. The FTC alleges that the defendants falsely told consumers they could get $10,000 or more in government or private grant money by using the defendants’ service. They charged up-front fees ranging from $295 to $4,995, and routinely told consumers that, for an additional fee, they could either obtain more grant money or receive the money faster.


OCC updates 'Business Combinations' booklet

On Tuesday, the OCC issued Bulletin 2018-22 announcing version 1.1 of the "Business Combinations" booklet of the Comptroller's Licensing Manual, with minor technical corrections and noting one process update on pages 28 and 29 relating to the public notice and comment period for bank merger and acquisition applications.


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