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Fed issues Outstanding CRA rating

Our review of the Federal Reserve Board's Community Reinvestment Act Evaluations and Ratings Search page has revealed that the Federal Reserve Banks made public their ratings of five CRA evaluations in July. Four of the evaluations were rated "Satisfactory." Congratulations to Banco Polular de Puerto Rico, San Juan, on its "Outstanding" rating! ¡Gufiao!


$9.1M sent to defrauded Amazing Wealth System customers

The Federal Trade Commission is sending more than $9.1 million in check and PayPal payments to customers who paid for an “Amazing Wealth System” workshop.

A lawsuit filed by the Commission alleged the defendants, FBA Stores and related companies and individuals, falsely claimed their “Amazing Wealth System” would enable people to create a profitable online business selling products on Amazon. However, the defendants had no affiliation with, buyers did not earn the advertised income, most consumers lost significant amounts of money, and many of the customers experienced problems with their Amazon stores, including losing their ability to sell on

The FTC is sending payments to 13,348 customers with an average refund amount of $684.24.


Fed revises Municipal Liquidity Facility pricing

The Federal Reserve Board has announced revised pricing for its Municipal Liquidity Facility (MLF). The revised pricing reduces the interest rate spread on tax-exempt notes for each credit rating category by 50 basis points and reduces the amount by which the interest rate for taxable notes is adjusted relative to tax-exempt notes. The changes will ensure the MLF continues to provide an effective backstop to assist U.S. states and local governments as they weather the pandemic.


Long-Term Care Insurance report released

The Treasury Department has released the report of the Federal Interagency Task Force on Long-Term Care Insurance, which describes the work conducted by the Task Force and presents recommendations to reform the regulation of long-term care insurance (LTCI) in the United States. The primary objectives of the Task Force were to analyze, evaluate, and make recommendations concerning a list of federal policy options presented by the National Association of Insurance Commissioners in April 2017, other potential new federal policies to complement state-based regulation of LTCI, and the manner and degree to which current laws and regulations respond to newer LTCI product designs and features.


Individual settles potential OFAC liability

OFAC has announced a $5,000 settlement agreement with a U.S. individual who, at the time of the apparent violations was a civilian direct hire of the U.S. Army and stationed at the U.S. embassy in Bogota, and has agreed to settle their potential civil liability for 24 apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations, 31 C.F.R. part 598. Between approximately October 2015 and August 2016, the individual engaged in at least 24 transactions valued at $3,349 that dealt in the blocked property interests of a foreign individual who at the time was a specially designated narcotics trafficker in apparent violation of the Kingpin Sanctions. OFAC determined that the person did not voluntarily disclose the apparent violations, and that the apparent violations constitute an egregious case.


New OFAC Sudan Program and Darfur guidance

OFAC has posted a notice it has published a new Sudan Program and Darfur Sanctions Guidance document and a new FAQ and removed eleven Sudan-related FAQs. OFAC has also amended FAQs pertaining to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) as it applies to Sudan and five general and compliance FAQs to reflect that Sudan has not been a comprehensively sanctioned country since October 12, 2017.


CFPB adds Payday Lending Rule FAQs

The Consumer Financial Protection Bureau has posted several additional FAQs on compliance with the Payday Lending Rule. The FAQs are presented in three groups:

  • Covered loans (22 questions, with 7 added or updated)
  • Payment transfers (11 questions, with 3 added or updated)
  • Payment notices (1 question, which was added or updated)


    Public housing authorities to get $472M

    HUD Secretary Carson has announced $472 million in CARES Act funding to help low income families during the coronavirus pandemic. This funding can be used by Public Housing Authorities to help families assisted by Housing Choice Vouchers and Mainstream vouchers prevent, prepare for and respond to the coronavirus. The funding will be awarded to Public Housing Authorities across the country.


    Fed announces large bank capital requirements

    The Federal Reserve has released the individual large bank capital requirements that will be effective October 1, 2020. Under its framework for large banks—those with more than $100 billion in total assets—capital requirements are in part determined by stress test results, which provide a risk-sensitive and forward-looking assessment of capital needs. The announcement listed the total common equity tier 1 (CET1) capital requirement for each of the 34 banks with over $100 billion in total assets, comprising:

    • Minimum capital requirements, which are the same for each firm and are 4.5 percent;
    • The stress capital buffer, which is determined from the stress test results, and is at least 2.5 percent; and
    • If applicable, a capital surcharge for global systemically important banks, or GSIBs, which is at least 1.0 percent.

    The Board also affirmed the stress test results for five firms that requested reconsideration (BMO Financial Corporation, Capital One Financial Corporation, Citizens Financial Group, Inc., The Goldman Sachs Group Inc., and Regions Financial Corporation). The reconsideration process involved an independent group—separate from the stress testing group—that analyzed and evaluated the results. The results were checked for errors and to ensure that the stress test models, which project the loan losses for banks, worked as intended and were consistent with the Board's stress test framework. The Board said that information gleaned from the reconsideration process will be used to continue improving its stress testing methodology.


    Interactive Brokers to pay $38M for BSA/AML lapses

    The SEC has announced that Interactive Brokers LLC will pay an $11.5 million penalty to settle charges it repeatedly failed to file Suspicious Activity Reports (SARs) for U.S. microcap securities trades it executed on behalf of its customers. In parallel actions, the Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC) also announced settlements with Interactive Brokers related to anti-money laundering failures in which the registered broker-dealer agreed to pay penalties of $15 million and $11.5 million, respectively, for a total of $38 million in penalties paid to the three agencies.

    For additional information, see Interactive Brokers LLC paying $38M for BSA/AML failures, in the BankersOnline Penalties pages.


    FinCEN repeals special measure for Banco Delta Asia

    FinCEN has published a final rule [85 FR 48105] repealing and removing its regulations concerning Special Measures against Banco Delta Asia at 31 CFR 1010.655, effective today.


    HUD physical inspections to resume

    Secretary Carson has announced HUD will resume Real Estate Assessment Center (REAC) inspections of HUD multifamily and public housing properties and units under strict safety protocols during the national recovery from the COVID-19 pandemic. REAC inspections are the assessment tool that ensures HUD-assisted properties meet federal standards of health, safety, and accessibility. The inspections were paused due to the Coronavirus outbreak in March of 2020.


    OFAC adds a dozen new designations

    On Friday, OFAC imposed sanctions on eleven individuals for undermining Hong Kong’s autonomy and restricting the freedom of expression or assembly of the citizens of Hong Kong. These actions were taken in accordance with Executive Order 13936, “The President’s Executive Order on Hong Kong Normalization,” which President Trump issued on July 14, 2020.

    OFAC also took action against Bi Sidi Souleymane, also known as Sidiki Abbas. Souleymane leads the Central African Republic (CAR)-based militia group Return, Reclamation, Rehabilitation (3R). OFAC's action was coordinated with an action by the U.N. Security Council.

    For more information on the identities of the twelve individuals designated in OFAC's actions, see the BankersOnline OFAC Update.


    Consumer credit falls again in second quarter

    The Federal Reserve Board's G.19 data indicate that consumer credit decreased at a seasonally adjusted annual rate of 6-3/4 percent during the second quarter of 2020. Revolving credit decreased at an annual rate of 31-3/4 percent, while nonrevolving credit increased at an annual rate of 2 percent. In June, revolving credit decreased at an annual rate of 2-3/4 percent, while nonrevolving credit increased at an annual rate of 4-1/4 percent.


    OCC reduces assessments in response to pandemic

    The OCC has announced it is reducing assessments on all OCC-supervised banks in response to the national health emergency related to COVID-19.

    Assessments due on September 30, 2020, will be calculated using the December 31, 2019, or June 30, 2020, Call Report for each institution, basing the assessment on the Call Report showing the lower total assets figure. The interim reduction of assessments helps avoid penalizing banks for working with their customers throughout the pandemic, sometimes resulting in temporary increases in loans or deposits.


    OCC CRA evaluation ratings released

    The OCC has released a list of 30 Community Reinvestment Act (CRA) performance evaluations that became public in July. The possible ratings are outstanding, satisfactory, needs to improve, and substantial noncompliance. Of the evaluations listed, 21 are rated satisfactory.

    We congratulate these nine institutions, which were rated outstanding:


    Consumer loan company pays $21.7M for FCPA violations

    The Securities and Exchange Commission has announced that World Acceptance Corporation, a South Carolina-based consumer loan company, has agreed to pay $21.7 million to resolve charges that it violated the Foreign Corrupt Practices Act (FCPA).

    The SEC Order in the matter states the Commission found that from at least December 2010 through June 2017, World Acceptance Corporation’s former Mexican subsidiary, WAC de Mexico S.A. de C.V., paid more than $4 million in bribes to Mexican government officials and union officials to secure the ability to make loans to government employees and ensure that those loans were repaid in a timely manner. According to the order, WAC Mexico paid the bribes in a variety of ways, including by depositing money into bank accounts linked to the officials and by hiring an intermediary to distribute large bags of cash among the officials. The SEC found that the bribes were inaccurately recorded in World Acceptance Corporation’s books and records as legitimate business expenses. The order also states that World Acceptance Corporation lacked internal accounting controls sufficient to detect or prevent the payments of such bribes and that management lacked the appropriate tone at the top regarding internal audit and compliance, thereby undermining the effectiveness of those functions.

    The order requires that the company cease and desist from violating the anti-bribery, books and records, and internal controls provisions of the FCPA, and pay $17.826 million in disgorgement, $1.9 million in prejudgment interest, and a $2 million penalty.


    Update on Fed's COVID-19 lending facilities

    The Federal Reserve Board has released a report with an update concerning lending facilities established by the Board under section 13(3) of the Federal Reserve Act in response to the COVID-19 pandemic.


    Details of new FedNow settlement service announced

    The Federal Reserve Board yesterday announced details of the FedNow℠ Service, a new 24x7x365 interbank settlement service with clearing functionality to support instant payments in the United States. The features and functionality described in the accompanying Federal Register notice represent a key milestone in the FedNow Service's development and are based on input received from the public in response to the Board's 2019 request for comment.

    The Federal Reserve will take a phased approach to service implementation. The first release of the FedNow Service will provide core clearing and settlement features that will support market needs and help banks manage the transition to a 24x7x365 service. Based on ongoing stakeholder engagement, additional features and service enhancements will be introduced over time. The target launch date for the service remains 2023 or 2024, with a more specific time frame to be announced after additional work is completed.


    Enforcement actions against Capital One

    Capital One Financial Corporation, McLean, Virginia, was issued a consent cease and desist order by the Federal Reserve Board, and its national bank subsidiaries, Capital One, N.A. and Capital One Bank (USA), N.A., were assessed an $80 million civil money penalty and issued a consent cease and desist order by the OCC.

    The enforcement actions were taken for the banks' failure to establish effective risk assessment processes prior to migrating significant information technology operations to the public cloud environment, and their failure to correct the deficiencies in a timely manner, culminating in a significant data breach in March 2019 that affected the personal information of Capital One credit card customers and applicants for credit card products.

    For addition information, see this BankersOnline Penalty Page.


    U.S.-UK innovation partnership meeting

    Treasury reported yesterday on Wednesday's virtual meeting of U.S. and UK participants in the countries' Financial Innovation Partnership to exchange views on topics of mutual interest. The Regulatory and Commercial Pillars of the Partnership met jointly to discuss deepening U.S.-UK ties in financial innovation. Also, the representatives of the U.S. Treasury Department and Her Majesty's Treasury chaired a discussion of the Regulatory Pillar of the FIP, engaging on topics including digital payments, operational resilience, cross-border testing of innovative financial services, and regulatory and supervisory technology.

    Participants acknowledged the importance of the ongoing partnership in monitoring and analyzing trends in global financial innovation, as well as being an integral component of the U.S.-UK financial services cooperation.


    OFAC sanctions Libyan criminal network

    Treasury reported yesterday that OFAC has designated the members of a network of smugglers contributing to instability in Libya. OFAC designated Libyan national Faysal al-Wadi, operator of the vessel Maraya; two associates, Musbah Mohamad M Wadi and Nourddin Milood M Musbah, and the Malta-based company, Alwefaq Ltd, under the authority of Executive Order 13726. Additionally, the vessel Maraya was identified as blocked property.

    For identification information on the five additions to OFAC's SDN List, see this BankersOnline OFAC Update.


    Amendments to fund disclosures proposed by SEC

    The Securities and Exchange Commission has proposed comprehensive modifications to the mutual fund and exchange-traded fund disclosure framework to better serve the needs of retail investors. The proposed disclosure framework would feature concise and visually engaging shareholder reports that would highlight information that is particularly important for retail investors to assess and monitor their fund investments. The proposal is a central component of the Commission’s investor experience initiative and responds to comments the Commission received in response to a 2018 request for comment on retail investors’ experience with fund disclosure.

    Comments on the Commission's proposal will be accepted for 60 days following publication in the Federal Register.


    Flood Insurance Program suspensions published

    The Federal Emergency Management Agency has published a final rule at 85 FR 47673 in today's Federal Register identifying 21 communities in Lackawanna County, Pennsylvania, and one in Randolph County, Illinois, that were scheduled for suspension from the National Flood Insurance Program on August 5, 2020, for noncompliance with the floodplain management requirements of the program.

    • PA: Benton, Blakely, Covington, Dalton, Dunmore, Elmhurst, Fell, Glenburn, Greenfield, Jefferson, Jessup, Mayfield, Newton, North Abington, Old Forge, Scott, Scranton, South Abington, Taylor, Throop, and Waverly
    • IL: Prairie du Rocher

    If any of the communities met the floodplain management requirements prior to August 5, they were not suspended.


    OFAC sanctions Zimbabwean businessman

    A Treasury press release reported Wednesday that OFAC has designated Kudakwashe Regimond Tagwirei for providing support to the leadership of the Government of Zimbabwe, as well as Sakunda Holdings for being owned or controlled by Tagwirei.

    OFAC also removed sanctions on the recently-deceased John Bredenkamp and 20 companies owned or controlled by him.

    For identity information on these additions to and removals from OFAC's SDN List, see the BankersOnline OFAC Update.


    July 2020 SLOOS on bank lending practices

    The Federal Reserve Board has posted the results of the July 2020 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS), which addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the previous three months, roughly corresponding to the second calendar quarter.

    Respondents indicated that, on balance, they tightened their standards and terms on commercial and industrial (C&I) loans to firms of all sizes. Banks reported weaker demand for C&I loans from firms of all sizes. Meanwhile, banks tightened standards and reported weaker demand across all three major commercial real estate (CRE) loan categories—construction and land development loans, nonfarm nonresidential loans, and multifamily loans—over the second quarter of 2020.

    Banks tightened standards across all categories of residential real estate (RRE) loans and across all three consumer loan categories—credit card loans, auto loans, and other consumer loans—over the second quarter of 2020 on net. Banks reported stronger demand for all categories of RRE loans and weaker demand for all categories of consumer loans.

    Banks also responded to a set of special questions inquiring about the current level of lending standards relative to the midpoint of the range over which banks’ standards have varied since 2005. Banks, on balance, reported that their lending standards across all loan categories are currently at the tighter end of the range of standards between 2005 and the present.

    Paycheck Protection Program loans were not mentioned in the survey.


    OCC creates exception to CIF withdrawal period rule

    The OCC has issued an interim final rule clarifying rules on account withdrawals from collective investment funds (CIFs).

    The rule amends the OCC's requirements applicable to national banks and federal savings associations administering CIFs invested primarily in real estate or other assets that are not readily marketable and codifies the time a bank generally has for withdrawing accounts from those CIFs. The rule establishes an exception that allows a bank to extend the period for withdrawals, with OCC approval and provided that certain conditions are met. The rule also creates an opportunity for additional extensions with OCC approval.

    Comments on the interim final rule will be accepted for 30 days following Federal Register publication.


    FDIC releases CRA evaluation ratings

    The FDIC has released a list of 64 banks recently evaluated for compliance with the Community Reinvestment Act whose evaluation ratings were made public in August. Sixty of the banks received a Satisfactory rating. One was rated Needs to Improve, and the following three were rated Outstanding:


    SBA FAQs on PPP loan forgiveness

    The Small Business Administration has issued a collection of "Frequently Asked Questions (FAQs) on PPP Loan Forgiveness." The FAQs were issued in consultation with the Department of the Treasury to address borrower and lender questions concerning forgiveness of PPP loans.

    The FAQs are grouped in these categories:

    • General Loan Forgiveness
    • Loan Forgiveness Payroll Costs
    • Loan Forgiveness Nonpayroll Costs
    • Loan Forgiveness Reductions


    NMLS posts update to Policy Guidebook

    An updated version of the NMLS Policy Guidebook has been posted to the NMLS Resource Center and the Regulator Resource Center. A summary of the update indicates that there was a single change adding language stating that NMLS requires each entity under a series LLC to have its own unique EIN for licensing purposes.


    FinCEN adds FAQs on CDD requirements

    FinCEN has issued Guidance FIN-2020-G002 in the form of three new FAQs regarding customer due diligence requirements for covered financial institutions. The three FAQs clarify the regulatory requirements related to—

    • obtaining customer information;
    • establishing a customer risk profile; and
    • performing ongoing monitoring of the customer relationship in order to assist covered financial institutions with their compliance obligations in these areas.

    The new FAQs, developed in consultation with federal financial regulators, are in addition to those that were published on July 19, 2016, and April 3, 2018.


    FTC sues merchant cash advance lender for UDAP

    The Federal Trade Commission has filed a complaint in the U.S. District Court for the Southern District of New York against Yellowstone Capital LLC and Fundry LLC, both New York limited liability companies; and Yitzhak D. Stern, also known as Isaac Stern, and Jeffrey Reece, individually and as officers of the two LLCs; seeking permanent injunctive and other equitable relief. Yellowstone and Fundry are providers of merchant cash advances, and used deception to lure small business customers, then regularly withdrew money from their accounts without consent even after the customers had repaid the money they owed, according to the Commission's complaint.

    Merchant cash advances are a form of financing in which the defendants provide money to a small business up front in exchange for a larger amount repaid through daily automatic payments. The Commission alleges that the defendants unlawfully withdrew millions of dollars in excess payments from their customers' accounts, and took weeks or months to provide refunds when challenged by those customers.

    In addition, the complaint alleges that for years Yellowstone deceived potential customers about the amount of money they would receive, with the amount shown on the contract not reflecting additional fees that would be deducted. According to the complaint, these fees totaled hundreds and even thousands of dollars, and were not revealed to business owners until, in some cases, after their contracts were signed, The FTC also alleges that the defendants relied on deceptive marketing to promote their services. Specifically, the complaint states that Yellowstone promised that business owners would not be required to provide collateral or be subject to a personal guaranty. These promises appeared in online ads and other forms of marketing, but in many instances Yellowstone’s contracts actually required business owners to be personally liable if their business failed to make repayments, as well as put the business and all of its property up as collateral.


    HUD awards $74M for rental housing

    HUD has announced the award of over $74 million in grants to 12 state housing finance agencies to support affordable rental housing for extremely low-income persons with disabilities. The awards will support up to five years of rental assistance for approximately 2,400 units of housing in buildings participating in project rental assistance through HUD’s Section 811 Supportive Housing for Persons with Disabilities program.

    HUD provides rental assistance to more than 35,000 households through its Section 811 program. The program supports:

    • Increasing the supply of accessible rental housing units for individuals with disabilities by integrating these units within existing, new, or renovated multifamily developments.
    • Creating effective, successful and sustainable partnerships between state housing agencies and state Health and Human Services/Medicaid agencies to provide permanent housing for persons with disabilities with access to appropriate supportive services; and
    • Identifying innovative and replicable ways for using and leveraging Project Rental Assistance funds.


    Treasury marketable borrowing estimates

    Treasury has announced its current estimates of privately-held net marketable borrowing for the July - September 2020 and October - December 2020 quarters. These estimates assume $1 trillion of additional borrowing need in anticipation of additional legislation being passed in response to the COVID-19 outbreak.

    During the July - September 2020 quarter, Treasury expects to borrow $947 billion in privately-held net marketable debt, assuming an end-of-September cash balance of $800 billion. The borrowing estimate is $270 billion higher than announced in May 2020. The increase in privately-held net marketable borrowing is primarily driven by higher expenditures, due to a shift from the prior quarter and anticipated new legislation, largely offset by the higher beginning-of-July cash balance and higher receipts.

    During the October – December 2020 quarter, Treasury expects to borrow $1.216 trillion in privately-held net marketable debt, assuming an end-of-December cash balance of $800 billion.


    FFIEC statement on COVID-19-related loan accommodations

    The Federal Financial Institutions Examination Council (FFIEC) has issued a statement providing prudent risk management and consumer protection principles for financial institutions to consider while working with borrowers as initial coronavirus-related loan accommodation periods come to an end and they consider additional accommodations.

    As initial loan accommodation periods come to an end, some borrowers may be able to resume contractual payments, and others may be unable to meet their obligations due to continuing financial challenges. The agencies encourage financial institutions to consider, when appropriate, prudent options for additional accommodations that can ease cash flow pressures on affected borrowers, improve their capacity to service debt, and facilitate the financial institution’s prudent management of its loans, consistent with applicable laws and regulations.

    The statement also addresses issues relative to accounting and regulatory reporting and internal control systems.


    FATF webinars on COVID-19 and money laundering

    The Financial Action Task Force has made two webinars on money laundering, terrorist financing and COVID-19 available for viewing:

    • COVID-19 and the Changing Money Laundering and Terrorist Financing Risk Landscape
    • The Impact of COVID-19 on the Detection of Money Laundering and Terrorist Financing


    NCUA bans former CU employee

    The NCUA reported that it issued one prohibition notice in July, banning a former employee of Space Coast Credit Union in Melbourne, Florida, from participating in the industry after she was sentenced on charges of identity theft, embezzlement, fraud and theft.


    Funding of March 2020 C&I drawdowns discussed

    An article, "How Did Banks Fund C&I Drawdowns at the Onset of the COVID-19 Crisis?" has been posted to the Federal Reserve Board's FEDS Notes pages discussing how banks funded C&I drawdowns at the onset of the COVID-19 crisis. Banks experienced significant balance sheet expansions in March 2020 due to unprecedented increases in commercial and industrial (C&I) loans and deposit funding. According to the Federal Reserve's H.8 data, "Assets and Liabilities of Commercial Banks in the U.S.", C&I loans increased by nearly $480 billion in March—the largest monthly increase in the history of this series, surpassing the nearly $90 billion increase in C&I loans in the six weeks following Lehman Brothers' collapse in 2008.

    Commentary in banks' and firms' earnings calls, as well as write-in comments provided in weekly data submissions, indicate that this growth was primarily attributable to firms drawing down revolving lines of credit to make up for revenue and funding disruptions related to the coronavirus pandemic.


    OFAC sanctions Chinese entity and officials

    OFAC sanctioned a Chinese government entity and two current or former government officials on July 31 in connection with serious rights abuses against ethnic minorities in the Xinjiang Uyghur Autonomous Region (XUAR). These designations include the Xinjiang Production and Construction Corps (XPCC), Sun Jinlong, a former Political Commissar of the XPCC, and Peng Jiarui, the Deputy Party Secretary and Commander of the XPCC. The entity and officials were designated for their connection to serious human rights abuse against ethnic minorities in Xinjiang, which reportedly include mass arbitrary detention and severe physical abuse, among other serious abuses targeting Uyghurs, a Turkic Muslim population indigenous to Xinjiang, and other ethnic minorities in the region.

    For details on the identity of the designated entity and individuals, and information on a new General License issued in connection with the designations, see the BankersOnline OFAC Update.

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