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05/23/2022

Wells Fargo Advisors pays $7M for SARS not filed

The Securities and Exchange Commission has announced charges against Wells Fargo Advisors for failing to file at least 34 Suspicious Activity Reports (SARs) in a timely manner between April 2017 and October 2021. Wells Fargo Advisors, the St. Louis-based broker-dealer, has agreed to pay $7 million to settle the charges.

According to the SEC’s order, due to Wells Fargo Advisors’ deficient implementation and failure to test a new version of its internal anti-money laundering (AML) transaction monitoring and alert system adopted in January 2019, the system failed to reconcile the different country codes used to monitor foreign wire transfers. As a result, Wells Fargo Advisors did not timely file at least 25 SARs related to suspicious transactions in its customers’ brokerage accounts involving wire transfers to or from foreign countries that it determined to be at a high or moderate risk for money laundering, terrorist financing, or other illegal money movements. The order also found that, beginning in April 2017, Wells Fargo Advisors failed to timely file at least nine additional SARs due to a failure to appropriately process wire transfer data into its AML transaction monitoring system in certain other situations.

In addition to the $7 million penalty, Wells Fargo Advisors, without admitting or denying the SEC’s findings, agreed to a censure and a cease and desist order. Wells Fargo Advisors is the trade name used by Wells Fargo Clearing Services, LLC, a registered broker-dealer and investment adviser subsidiary of Wells Fargo & Company,

05/20/2022

Fed finalizes rule for transfers over FedNow service

The Federal Reserve Board has announced it has finalized a rule that governs funds transfers over the Federal Reserve Banks' FedNow Service. The final rule, which adds a new subpart C to Regulation J, is substantially similar to the proposal from last year, with a few clarifications in response to comments.

The FedNow Service is a new 24x7x365 interbank settlement service with clearing functionality to support instant payments in the United States and is expected to be available in 2023.

The final rule provides a comprehensive set of rules governing funds transfers over the FedNow Service and provides legal certainty and clarity on the rights and obligations of parties to a transfer over the FedNow Service.

The rule will become effective at the start of the first calendar quarter following its publication in the Federal Register.

05/20/2022

CFPB: states can enforce federal consumer protection laws

The Consumer Financial Protection Bureau yesterday announced it has issued an interpretive rule that describes states’ authorities to pursue lawbreaking companies and individuals that violate the provisions of federal consumer financial protection law. Because of the crucial role states play in protecting consumers, the Consumer Financial Protection Act (part of the Dodd-Frank Act of 2010) grants their consumer protection enforcers the authority to protect their citizens and otherwise pursue lawbreakers. The interpretive rule affirms:

  • States can enforce the Consumer Financial Protection Act, including the provision making it unlawful for covered persons or service providers to violate any provision of federal consumer financial protection law. This provision covers the Consumer Financial Protection Act itself as well as its 18 enumerated consumer laws and certain other laws, along with any rule or order prescribed by the CFPB under the Consumer Financial Protection Act, an enumerated consumer law, or pursuant to certain other authorities.
  • States can pursue claims and actions against a broad range of entities. The Consumer Financial Protection Act outlines entities over which the CFPB may exercise its enforcement authority under the statute. States are able to bring actions against a broader cross-section of companies and individuals.
  • CFPB enforcement actions do not put a halt to state actions. Sometimes states bring enforcement actions in coordination with the CFPB. A state may also bring an enforcement action to stop or remediate harm that is not addressed by a CFPB enforcement action against the same entity. Nothing in the Consumer Financial Protection Act precludes these complementary enforcement activities that serve to protect consumers at both the national and state levels.

The interpretive rule will become effective upon publication in the Federal Register.

05/20/2022

Targeting Hizballah's abuse of the business sector

On Thursday, Treasury announced that OFAC had designated Ahmad Jalal Reda Abdallah, a Lebanese businessman and Hizballah financial facilitator, as well as five of his associates and eight of his companies in Lebanon and Iraq. The action was taken to counter Hizballah’s modus operandi of using the cover of seemingly legitimate businesses to generate revenue and leverage commercial investments across a multitude of sectors to secretly fund Hizballah and its terrorist activities. It also demonstrates how Hizballah goes to great lengths to establish companies with opaque ownership structure in order to conceal their involvement in these businesses, and also their involvement in criminal activities such as altering of medication labels for black market pharmaceutical sales.

For a complete list of the individuals and entities designated yesterday, see the May 19, 2022, BankersOnline OFAC Update.

05/19/2022

FDIC guide on simplified coverage rules

The FDIC has issued FIL-23-2022 to announce the addition of a Small Entity Compliance Guide to its website to assist insured depository institutions and community banking organizations in understanding and preparing for the changes in deposit insurance coverage made by its January 28, 2022, final rule amending the deposit insurance regulations for trust accounts and mortgage servicing accounts. The rule becomes effective April 1, 2024.

05/18/2022

CFPB issues circular supporting FDIC's rule

The CFPB announced on Tuesday it has issued Consumer Financial Protection Circular 2022-02, "Deceptive representations involving the FDIC's name or logo or deposit insurance" to address the question of when representations involving the name or logo of the Federal Deposit Insurance Corporation (FDIC) or about deposit insurance constitute a deceptive act or practice in violation of the Consumer Financial Protection Act (CFPA).

The Bureau's guidance is that "Covered persons or service providers likely violate the CFPA’s prohibition on deception if they misuse the name or logo of the FDIC or engage in false advertising or make misrepresentations to consumers about deposit insurance, regardless of whether such conduct (including the misrepresentation of insured status) is engaged in knowingly. Representations about deposit insurance may be particularly relevant with respect to new financial products or services, especially those involving new technologies such as digital assets, including crypto-assets."

05/18/2022

FDIC final rule on advertising and misuse of FDIC name or logo

On Tuesday, the FDIC its approval of a final rule implementing its statutory authority to prohibit any person or organization from making misrepresentations about FDIC deposit insurance or misusing the FDIC’s name or logo.

In recent years, the FDIC has observed an increasing number of instances where individuals or entities have misused the FDIC’s name or logo, or have made false or misleading representations about deposit insurance. To provide transparency into how the FDIC will address these and similar concerns, the final rule clarifies the FDIC’s procedures for identifying, investigating, and where necessary, taking formal and informal enforcement actions against individuals or entities to address violations.

The rule, which will amend the FDIC's regulation on Advertisement of Membership at 12 CFR Part 328, will take effect 30 days after its publication in the Federal Register.


SAVE THE DATE! BankersOnline's John Burnett will present a special one-hour webinar on the FDIC's revised "Advertisement of Membership, False Advertising, Misrepresentation of Insured Status, and Misuse of the FDIC's Name or Logo" regulation on June 29, 2022, at 2:30 p.m. EDT.


05/17/2022

CFPB wants consistent enforcement of consumer financial protections

CFPB Director Rohit Chopra yesterday posted a CFPB Blog article to announce a new system for promoting consistent enforcement of consumer financial protections. The CFPB will issue Consumer Financial Protection Circulars to the broad set of government agencies responsible for enforcing federal consumer financial law, with guidance on how the CFPB intends to enforce federal consumer financial law.

The enforcers of federal consumer financial law include, most notably, state attorneys general and state regulators, as well as federal financial regulators such as the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the National Credit Union Administration. Some federal consumer financial laws are also enforceable by other federal agencies, including the Department of Justice, the Federal Trade Commission, the Farm Credit Administration, the Department of Transportation, and the Department of Agriculture. In addition, some of these laws provide for private enforcement.

The CFPB will also release Consumer Financial Protection Circulars publicly to increase transparency for the benefit of the public and regulated entities.

Circular 2022-01, issued yesterday, describes the circulars as policy statements under the Administrative Procedures Act that will provide background information about applicable law, articulate considerations relevant to the CFPB's exercise of its authorities, and advise other parties with authority to enforce federal consumer financial law. The Director of the CFPB will authorize issuance of each Consumer Financial Protection Circular, and the CFPB will publish them on its website and in the Federal Register.

05/16/2022

Deputy Comptroller testifies on artificial intelligence

On Friday, Deputy Comptroller for Operational Risk Policy Kevin Greenfield testified during a hearing before the House Financial Services Committee Task Force on Artificial Intelligence. He discussed the OCC's approach to responsible innovation and its supervisory expectations for banks’ use of AI, including regulatory compliance. Greenfield also discussed the OCC’s ongoing efforts to update the agency’s technological framework to support its bank supervision mandate.

05/16/2022

VA amends regs on fiduciary activities

The Department of Veterans Affairs has published a final rule [87 FR 29671 amending its regulations that govern fiduciary activities. The amendments revise specific procedures to exempt a VA-appointed fiduciary who is also serving as a court-appointed fiduciary from posting multiple bonds and to also exempt a VA-appointed fiduciary that is also a state agency with existing, state-mandated liability insurance or a blanket bond from having to obtain an additional bond payable to the Secretary of Veterans Affairs.

The rule will become effective June 15, 2022.

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