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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.)

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OFAC acts against Hizballah supporters and Turkish company

The Treasury Department has announced that OFAC acted yesterday to disrupt Hizballah’s financial support networks by designating Muhammad ‘Abdallah al-Amin (al-Amin) as a Specially Designated Global Terrorist (SDGT) under Executive Order 13224. OFAC designated al-Amin for providing material support to Hizballah insider and financier Adham Husayn Tabaja. In addition to al-Amin, OFAC designated seven Lebanon-based companies that are owned or controlled by al-Amin.

Treasury also announced that OFAC made North Korea-related designations of a Turkish company, SIA Falcon International Group, for attempts to circumvent sanctions on goods that have long been prohibited by UN Security Council (UNSC) resolutions, as well as three individuals involved in those attempts.

For identity information on the designated parties in these two OFAC actions, and 422 OFAC administrative SDN List changes, see our OFAC Update.


FinCEN Advisory on risks linked to Nicaraguan corruption

FinCEN has announced it issued an advisory (FIN-2018-A005) Wednesday to alert U.S. financial institutions of the increasing risk that proceeds of political corruption from Nicaragua may enter or traverse the U.S. financial system. FinCEN stated in its press release that it expects that senior foreign political figures connected to the regime of Nicaraguan President Daniel Ortega could react to the perceived threat of further unrest, potential sanctions, or other factors by moving assets out of their accounts in Nicaragua or elsewhere. These assets could be the proceeds of corruption, and they may be directed into U.S. accounts, or laundered through the U.S. financial system. FinCEN requests that financial institutions file Suspicious Activity Reports (SARs), consistent with their existing Bank Secrecy Act (BSA) obligations, when they identify potential misuse of Nicaraguan public funds or potential proceeds of political corruption associated with senior foreign political figures connected to the Ortega regime.


Bureau settles with Bluestem companies

The Bureau of Consumer Financial Protection has announced that the Bureau and Bluestem Brands, Inc.; Bluestem Enterprises, Inc.; and Bluestem Sales, Inc. (the Bluestem companies) have filed an administrative consent order resolving the Bureau’s allegations that after consumers made payments to the Bluestem companies on debts that the companies had already sold, the Bluestem companies substantially delayed sending those payments to the third-party debt buyers.

The Bureau found that the Bluestem companies violated the Consumer Financial Protection Act of 2010 by unfairly delaying the transfer of payments that customers had made to the Bluestem companies on charged-off accounts to the third-party debt buyers who had purchased those accounts. The Bureau found that between 2013 and 2016, Bluestem delayed forwarding payments for more than 31 days in 18,000 instances; in 3,500 of those instances, Bluestem delayed forwarding payments for more than a year. These delays likely subjected customers to misleading collection activity, including collection activity on accounts that they had completely paid off.

The Bluestem companies are now required to improve their processes to timely identify and forward customer payments on accounts sold to third parties, prevent consumers from making payments by phone or on the companies’ websites on sold accounts, and notify customers who do make payments to the Bluestem companies on sold accounts that their accounts have been sold. The companies will also pay a civil money penalty of $200,000.


HUD sets Section 108 credit subsidy fee

HUD has published a Notice [83 FR 50257] in today's Federal Register announcing that HUD will collect a credit subsidy fee at closing equal to 2.23 percent of the principal amount of Section 108 loans during fiscal year 2019. The revised fee rate will be applicable beginning November 5, 2018.


Suspensions from flood insurance program

FEMA has published a rule [83 FR 50289] in today's Federal Register identifying communities in North Carolina, Ohio and Oregon that will be suspended from the National Flood Insurance Program on October 19, 2018, for noncompliance with the floodplain management requirements of the program:

  • NC: Chapel Hill, Durham, and unincorporated areas of Chatham, Durham and Orange Counties
  • OH: Fairfield, Hamilton, Middletown, Millville, Monroe, New Miami, Seven Mile, Trenton, and unincorporated areas of Butler County
  • OR: Beaverton, Forest Grove, Hillsboro, King City, North Plains, Sherwood, Tigard, Tualatin, and unincorporated areas of Washington County


Texas landlord and property manager charged with discrimination

HUD has announced it is charging a McAllen, Texas property owner and management company with discriminating against families with children. HUD alleges the owners of El Patrimonio Apartments and its management company, Texas Regional Asset Management, LLC, threatened to fine a family $250 because their two children played in the community area of the complex. The charge also states that the apartment owners enacted a policy that required children under the age of 18 to be supervised by an adult family member while on the property, including the pool area. In one instance, a couple was threatened with the fine because their two children were playing in the community area while being supervised by adults who were not blood relatives.


New National Strategy for Counterterrorism

The President and the National Security Council have announced a new National Strategy for Counterterrorism. Treasury Secretary Mnuchin issued the following statement regarding the new strategy, “President Trump’s new National Strategy for Counterterrorism will harden the U.S. financial system against terrorist threats and promote collaboration with allies to counter international terror financing networks. Treasury employs a broad array of tools to help disrupt terrorist attacks without putting our troops in harm’s way, and this Administration has accelerated efforts to shut down networks that terrorists use to finance their operations. Treasury will continue to apply sustained pressure on ISIS, Al-Qaeda, Hizballah and other Iran-sponsored proxies, Lashkar-E Tayyiba, and other terrorist organizations.”


SCOOS on Dealer Financing Terms released

The Federal Reserve has released the results of its September 2018 Senior Credit Officer Opinion Survey on Dealer Financing Terms, which collected qualitative information on changes over the previous three months in credit terms and conditions in securities financing and over-the-counter (OTC) derivatives markets. In addition to the core questions, the survey included a set of special questions about the potential effects of hypothetical future changes in the interest rate environment on the price and nonprice terms for financing provided to clients and on the positioning of different classes of clients for such changes. The 23 institutions participating in the survey account for almost all dealer financing of dollar-denominated securities to nondealers and are the most active intermediaries in OTC derivatives markets. The survey was conducted August 21 – 31, 2018. The core questions asked about changes between June 2018 and August 2018.


OCC to host Innovation Office Hours in Dallas

The OCC Office of Innovation has announced it will hold Innovation Office Hours November 14–15, 2018, in Dallas, Texas, to promote responsible innovation in the federal banking system. Office Hours are one-on-one meetings with the OCC’s Office of Innovation staff to discuss financial technology (fintech), new products or services, partnering with a bank or a fintech company, or other matters related to responsible innovation in the federal banking system.


Fed seeks input on actions to allow real-time settlement of faster payments

The Federal Reserve Board on Wednesday invited public comment on actions the Federal Reserve could take to support faster payments in the United States. The potential actions, which would facilitate real-time interbank settlement of faster payments, build on collaborative work with the payment industry through the Federal Reserve System's Strategies for Improving the U.S. Payment System (SIPS) initiative.

Views are being sought on two potential actions that may support the further development of faster payments in the United States while increasing the resiliency and security of services offered to the public:

  • the development of a service for real-time interbank settlement of faster payments 24 hours a day, seven days a week, 365 days a year (24x7x365); and
  • the creation of a liquidity management tool that would enable transfers between Federal Reserve accounts on a 24x7x365 basis to support services for real-time interbank settlement of faster payments, regardless of whether those services are provided by the private sector or the Federal Reserve Banks.

Comments on the proposal are due by December 14, 2018.

Fed Governor Lael Brainard, who co-chairs the Fed Payments Improvement initiative's oversight committee, addressed the Fed Payments Improvement Community Forum in Chicago on Wednesday, speaking on the role of the Federal Reserve in ensuring safe and reliable payments, moving to 24/7 real-time settlement, and the role of the Federal reserve in faster payments.


SEC updates and simplifies disclosure rules

The Securities and Exchange Commission has published a final rule [83 FR 50148] amending certain of its disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, U.S. Generally Accepted Accounting Principles, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments affect Commission regulations at 17 CFR parts 210, 229, 230, 239, 240, 249, and 274, and will be effective November 5, 2018.


Regulators support BSA/AML resource sharing

The federal depository institutions regulators and FinCEN yesterday issued a joint statement to address instances in which certain banks and credit unions may decide to enter into collaborative arrangements to share resources to manage their Bank Secrecy Act (BSA) and anti-money laundering (AML) obligations more efficiently and effectively. Collaborative arrangements as described in the statement generally are most suitable for financial institutions with a community focus, less complex operations, and lower-risk profiles for money laundering or terrorist financing. The statement, which was issued by the Fed, the FDIC, FinCEN, the NCUA, and the OCC, explains how these institutions can share BSA/AML resources in order to better protect against illicit finance risks, which can in turn also reduce costs. The Fed also issued SR-18-8 about the joint statement.


Fannie/Freddie Duty to Serve proposal

The FHFA has announced it is requesting public input as part of the agency's consideration of proposed modifications to Fannie Mae and Freddie Mac's 2018-2020 Underserved Markets Plans (Plans) under the Duty to Serve program. The Duty to Serve regulation allows Fannie and Freddie to request to modify its Plan at any time. However, FHFA must provide a non-objection to a proposed modification for them to become part of an Enterprise's Plan.

The FHFA has determined that public input would be helpful in considering four of Fannie Mae's twenty-two proposed modifications that would each make a substantial change to the content of its Plan. Freddie Mac has submitted one modification that FHFA considers to be a modest correction and, as a result, FHFA is not seeking public input on this proposal. FHFA requests public input on the proposed modifications to the 2018-2020 Underserved Markets Plan by Nov. 2, 2018 via the dedicated Duty to Serve page on FHFA's website or via mail to FHFA Division of Housing Mission and Goals, Seventh Floor, 400 Seventh Street SW, Washington D.C. 20219.


Fed update on expanded exam cycles

The Federal Reserve Board has issued Supervision and Regulation Letter SR-18-7 with an update on recent changes to the criteria for state member banks (SMB) and U.S. branches and agencies of foreign banks to be eligible for an expanded examination cycle of 18 months. The expanded cycles will apply to certain state member banks and U.S. branches and agencies of foreign banks with less than $3 billion in total assets meeting the criteria described in the letter.


McWilliams on 'Trust through Transparency'

In a speech at the 2018 Community Banking in the 21st Century Research and Policy Conference in St. Louis, Missouri, FDIC Chairman Jelena McWilliams announced a new, agency-wide "Trust through Transparency" initiative. The FDIC has launched a new section on its public website to provide new performance metrics that cross its business lines. The metrics will include data on the turnaround times for examinations and bank applications and timely response rates for the FDIC call center. The site also contains decisions related to appeals of material supervisory determinations and deposit insurance assessments, as well as information on the FDIC's policies and procedures. The metrics will be updated regularly, and new materials will be added to the site as the agency creates more ways to shed light on the way it conducts business.

In addition, said Williams, the FDIC recently issued a request for information on how to make communication with insured depository institutions more effective, streamlined, and clear. Last month, the agency asked for comment on a proposal to retire more than half of the 664 risk management supervision-related Financial Institution Letters it issued between 1995 through 2017. Those FILs are outdated or convey regulations or other information that is still in effect but available elsewhere on the FDIC's website. A unique mailbox,, has been created to allow interested stakeholders to share ways the FDIC can improve transparency.


Chairman McWilliams on EGRRCPA implementation progress

In a written statement before the Senate Committee on Banking, Housing, and Urban Affairs, FDIC Chairman Jelena McWilliams described the actions that the FDIC has taken or plans to take to implement the Economic Growth Act's reforms, along with a description of other initiatives and priorities aimed at rightsizing the regulatory requirements for community banks.


OFAC sanctions parties associated with Yakuza syndicate

the U.S. Department of the Treasury has reported that its Office of Foreign Assets Control took action Tuesday against two companies and four individuals in Japan associated with the Yamaguchi-gumi, the largest and most prominent Japanese Yakuza syndicate. The companies and individuals were designated under Executive Order 13581, which targets significant transnational criminal organizations (TCOs) and their supporters. OFAC's action was designed to protect the U.S. financial system from the malign influence of TCOs and to expose the companies and individuals who are supporting them or acting on their behalf.

For identity information on the designated companies and individuals, and the names of two individuals removed from Kingpin Act sanctions, see our OFAC Update.


Proposed Call Report revisions

FDIC FIL-54-2018, issued yesterday, reports that, in response to changes in the accounting for credit losses under the Financial Accounting Standards Board's Accounting Standards Update ASU 2016-13, the banking agencies, under the auspices of the FFIEC, are requesting comment on proposed revisions to the Call Report and certain other FFIEC reports. Other changes addressed in the proposal, which relate to the reporting of high volatility commercial real estate exposures and reciprocal deposits, result from the Economic Growth, Regulatory Relief, and Consumer Protection Act EGRRCPA.

The proposed changes are also explained in FIL-51-2018, issued on behalf of the FFIEC banking agencies, and were published at 83 FR 49160 in the Federal Register on September 28. Institutions are encouraged to comment on the proposal by November 27, 2018.


Comptroller testifies on EGRRCPA implementation progress

Comptroller of the Currency Joseph M. Otting made an oral statement and offered written testimony yesterday on the implementation of the Economic Growth, Regulatory Reform, and Consumer Protection Act of 2018 before the Senate Committee on Banking, Housing, and Urban Affairs.

Comptroller Otting's testimony highlighted agency and interagency progress toward implementing the law. That progress includes OCC release of a notice of proposed rulemaking required to grant federal savings associations greater flexibilities afforded by the law and approval of an NPR to increase the threshold for required recovery planning to banks with total consolidated assets of $50 billion or more. Otting also discussed interagency actions to implement provisions of the law that exempt smaller banks from the Volcker Rule, require certain municipal securities to be treated as high quality liquid assets, expand eligibility for the 18-month examination cycle, modify the agencies’ capital rules for high volatility commercial real estate exposures, and amend the agencies' swap margin rule.


OCC CRA evaluations released

The OCC has released 30 CRA performance evaluations that became public in September for national banks, federal savings associations and insured federal branches of foreign banks. Of the 30 evaluations listed, 23 are rated satisfactory, one is rated needs to improve, one is rated substantial noncompliance and five are rated outstanding.

The outstanding ratings were received by:

The rating of substantial noncompliance was received by a small bank in a suburb of Chicago that also received a substantial noncompliance rating in February 2015. The bank's loans were 13.8 percent of total assets as of December 31, 2017.


Labor to hold another listening session on white collar exemption

The Department of Labor has announced [83 FR 49869] another public listening session to gather views on the Part 541 white collar exemption regulations under the Fair Labor Standards Act. The FLSA exempts from both minimum wage and overtime protection “any employee employed in a bona fide executive, administrative, or professional capacity” and delegates to the Secretary of Labor the power to define and delimit these terms through regulation.

The listening session will be held in Washington, D.C., from 10 a.m. to noon on October 17, 2018. To obtain specific location details and register to attend, click HERE.


HUD awards $6.7M to reduce lead and other housing health problems

To help protect children and seniors from exposure to lead and other home health hazards, HUD has announced awards of $6.7 million to seven universities and public health organizations to improve methods for identifying and controlling residential health risks including lead-based paint, mold, secondhand tobacco smoke, and other indoor contaminants.


OCC updates PCA guidelines

OCC Bulletin 2018-33, issued September 28, sets forth the guidelines and procedures by which the Office of the Comptroller of the Currency (OCC) implements its authority under section 38 of the Federal Deposit Insurance Act, entitled “Prompt Corrective Action.” The bulletin rescinds Banking Circular 268, “Prompt Corrective Action,” and OCC Bulletin 1994-43, “Prompt Corrective Action – Capital Restoration Plans Guidelines.”

In a note to community banks, the Bulletin indicates that the OCC has not yet established the simplified leverage ratio capital framework required by the Economic Growth, Regulatory Relief, and Consumer Protection Act for qualified community banks for prompt corrective action purposes.


September G.5 foreign exchange rates posted

The Federal Reserve has released September 2018 G.5 foreign exchange rates data, which show the average rates of exchange together with comparable figures for other months. Averages are based on daily noon buying rates for cable transfers in New York City certified for customs purposes by the Federal Reserve Bank of New York.


FDIC requests feedback on improving communications

The FDIC is seeking comments on how the agency can maximize efficiency and minimize burden when communicating information to insured depository institutions, consumers, and others, about laws, rules, and related matters. The request for information (RFI) includes, for example, a request for ways to improve the FDIC's process for disseminating information through Financial Institution Letters (FILs), which are about new regulations, policies, publications and other matters of interest to banks or savings associations. Other questions asked in the RFI include:

  • How effective are the FDIC's current forms of communication? Are there other methods of communication the FDIC should consider?
  • Is FDIC information readily available and easy to find? If not, how can the FDIC make it easier to receive and find information?
  • How can the FDIC improve the website?
  • Which types of communication are best suited for informing insured depository institutions about new policies, laws, and regulations as well as educational materials, news and other updates?

Comments will be accepted for 60 days following publication in the Federal Register.

UPDATE: Published at 83 FR 50369 on 10/5/18, with comment period ending 12/4/18.


Small Business Lending Survey report

The FDIC has released a report on the findings of its Small Business Lending Survey, which collected data on how banks conduct their lending to small businesses. The report found that banks of different sizes approach small business lending differently, but that, overall, relationships are important for both small and large banks. Small banks, defined in the report as those with assets of less than $10 billion, are more likely to focus on relationship-based practices to conduct small business lending. Large banks, those with assets of $10 billion or more, are more likely to rely on transaction-based methods. However, both small and large banks place importance on relationships with their small business borrowers, and small business lending by banks of all sizes is characterized by high-touch, staff-intensive interactions that are primarily at the local level.


New York credit union liquidated

The NCUA has announced it liquidated LOMTO Federal Credit Union, Woodside, New York, on September 30, 2018. Teachers Federal Credit Union, of Hauppauge, New York, assumed LOMTO’s members and most shares as well as some loans and other assets. Teachers Federal Credit Union serves 300,541 members and has assets of nearly $6.1 billion, according to the credit union’s most recent Call Report. LOMTO Federal Credit Union, which had 2,238 members and assets of about $156 million, is the sixth federally insured credit union liquidated in 2018.


FDIC enforcement actions released

The FDIC has released a list of orders of administrative enforcement actions taken against banks and individuals in August (and one in July). Included were four removal and prohibition orders, two civil money penalties, and one notice of a hearing on an intent to prohibit.

A former New Jersey chief loan officer was assessed a $15,000 civil money penalty and issued a prohibition order for knowingly originating loans and extending the maturity dates on existing loans to borrowers despite their inability to repay, and for causing inaccurate. past-due reports on the loans to be provided to the board of directors of his bank. A former chief operating officer and board secretary of a Kentucky bank was assessed a $35,000 penalty and banned from the industry for causing the bank to pay for credit card expenses associated with non-bank business.

The notice of hearing on the FDIC's intent to prohibit was issued to a former Brownsville, Tennessee, banker who pleaded guilty in August 2017 to federal charges of embezzlement and misapplication of $888,470, before being sentenced to 33 months in jail and five years' probation, and ordered to pay $947,951 in restitution. This former head teller, customer service supervisor and branch administrator's series of unauthorized withdrawals from customer accounts over 11 years involved 334 transactions in at least 14 customer's accounts. The scheme was uncovered when two customers asked the bank for print-outs of their accounts while the former banker was away on vacation, and immediately noticed their account balance was incorrect.


Order exempting premium financing from CIP

FinCEN and the Federal Reserve Board, FDIC, NCUA, and OCC have jointly issued an Order granting an exemption from customer identification program requirements for premium finance loans. The exempted transactions are extended by banks (which, by definition, includes credit unions subject to the jurisdiction of the NCUA) and their subsidiaries to commercial customers to facilitate purchases of property and casualty insurance policies (premium finance loans or premium finance lending).


Second appraisals required for some new HECMs

The FHA has announced that it will begin requiring lenders originating new Home Equity Conversion Mortgages (HECMs), commonly referred to as reverse mortgages, to provide a second property appraisal under certain circumstances. FHA is instructing lenders to provide a second independent property appraisal in cases where FHA determines there may be inflated property valuations. FHA’s new requirement takes effect for case numbers assigned on or after October 1, 2018, through September 30, 2019. FHA will periodically review this guidance and, based on the results, may renew these requirements beyond fiscal year 2019.


Using TRACE for Treasury market info

The Federal Reserve Board and the Federal Reserve Bank of New York have announced on the FEDS Note and Liberty Street Economics blog that they aim to share initial insights on the Treasury cash transactions data reported to Financial Industry Regulatory Authority (FINRA)'s Trade Reporting and Compliance Engine (TRACE). The Treasury TRACE data initiative is a significant component of a broader inter-agency effort to enhance understanding and transparency of the Treasury securities market. This report focuses on trading volumes in the Treasury cash market. The first year of available data point to average daily trading volume in Treasury securities of around $574 billion, with single-day volumes peaking around $1 trillion. The data also confirm that primary dealers continue to play a central role in the market despite the growth of new market participants such as principal trading firms (PTFs).


Semiannual report on banking applications activity

The Federal Reserve Board has released its Semiannual Report on Banking Applications Activity covering the first half of calendar year 2018. The report provides information regarding the applications filed by banking organizations and reviewed by the Federal Reserve as of the most recent reporting period ending on June 30 and December 31 of each calendar year.


Presidential $1 coin program report

The FRB and the U.S. mint have posted their September 2018 annual report to Congress on their collaborative efforts to develop the Presidential $1 Coin Program and improve the distribution and circulation of $1 coins. The report assesses the remaining obstacles to the efficient and timely circulation of $1 coins, and the extent to which the goals of consultations with industry representatives, the vending industry, and other coin-accepting organizations are being met. The report recommends, as it has since 2012, that Congress end the annual reporting requirement, because production of the coins for circulation was ended in 2012, and the production of collectors' coins was terminated in 2016.


G.20 finance companies report

The Federal Reserve has posted the July 2018 G.20 data on finance companies' owned and managed receivables outstanding and auto loans: terms of credit.


Household debt service and financial obligations ratios

The Federal Reserve has posted its data on second quarter 2018 household debt service and financial obligations ratios.


NCUA prohibition order and notices

The NCUA reports that it issued one prohibition order and four prohibition notices in September. The individuals identified in the orders are prohibited from participating in the affairs of any federally insured financial institution:

  • a former employee of Independent Employers Group Federal Credit Union in Hilo, Hawaii, who had earlier pleaded guilty to the charge of embezzlement, sentenced to two years in prison, five years’ supervised release, and ordered to pay $308,696.38 in restitution.
  • a former employee of Valley State Employees Credit Union in Saginaw, Michigan, who had pleaded guilty to the charges of embezzlement and computer crime, sentenced to serve up to 20 years in prison and ordered to pay $709,000 in restitution.
  • a former employee of Grays Harbor Community Hospital Federal Credit Union in Aberdeen, Washington, who had pleaded guilty to the charge of theft, sentenced to 30 days in prison and 240 hours of community service, and ordered to pay $8,309.89 in restitution.
  • a former employee of First Hawaiian Homes Credit Union in Hoolehua, Hawaii, who had pleaded guilty to the charges of conspiracy to commit embezzlement and identity theft, sentenced to seven years in prison and three years’ supervised release, and ordered to pay more than $1 million in restitution.
  • a former employee or institution-affiliated party of South Jennings Catholic Federal Credit Union in Jennings, Louisiana, who agreed to the issuance of a prohibition order and to comply with all of its terms to settle and resolve the NCUA Board’s claims against her.


Private mortgage insurer eligibility rules tightened

The Federal Housing Finance Agency has announced updated private mortgage insurer eligibility requirements for loans either owned by or guaranteed by the Enterprises (Freddie Mac and Fannie Mae). The revised eligibility requirements, which become effective March 31, 2019, reflect changes to the financial and operational requirements for the Enterprises' mortgage insurance counterparties.


FTC settles with student debt relief operators

The Federal Trade Commission has announced that the operators of a student loan debt relief scam have agreed to settle charges that they bilked millions from consumers by falsely claiming to enroll consumers in loan forgiveness programs, for which they charged up to $1,000 in illegal upfront fees.


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