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FinCEN analysis of BSA data on BEC fraud in real estate sector

FinCEN has announced its release of a Financial Trend Analysis on patterns and trends identified in Bank Secrecy Act (BSA) data relating to business email compromise (BEC) in the real estate sector (RE-BEC) in 2020 and 2021. The report contains relevant information for the public, particularly individual homebuyers and the multiple entities involved in real estate transactions.

The report includes recommended actions for financial institutions, entities within the real estate sector, and the general public to detect and mitigate RE-BEC and other types of BEC incidents.


Hsu on safety and soundness focus and fairness in banking

In remarks yesterday at the National Community Reinvestment Coalition's 2023 Just Economy conference, Acting Comptroller of the Currency Michael J. Hsu emphasized the OCC's continued focus on the safety, soundness and fairness of the federal banking system and its work to elevate fairness in banking.

In his remarks, Acting Comptroller Hsu highlighted the OCC’s close monitoring of the market and the condition of its supervised institutions. He discussed the OCC’s continued work to improve the fairness of bank overdraft protection practices by encouraging banks to make pro-consumer reforms. He also discussed efforts to address discrimination and bias in lending, appraisals and artificial intelligence, and the OCC’s focus on expanding inclusion and opportunity by strengthening and modernizing the Community Reinvestment Act and maturing Project REACh.


Wells Fargo fined by Fed and OFAC

The Federal Reserve Board on Thursday announced it has fined Wells Fargo & Co., of San Francisco, California, $67.8 million for the firm's unsafe or unsound practices relating to historical inadequate oversight of sanctions compliance risks at its subsidiary bank, Wells Fargo Bank, N.A. Wells Fargo & Co.'s deficient oversight enabled the bank to violate U.S. sanctions regulations by providing a trade finance platform to a foreign bank that used the platform to process approximately $532 million in prohibited transactions between 2010 and 2015.

The Board's action was in conjunction with OFAC's announcement of a $30 million settlement with Wells Fargo Bank, N.A. For further information, see "Wells Fargo fined for OFAC violations," in the BankersOnline Penalty pages.


Facilitator sanctioned for attempted Russia-DPRK arms deal

OFAC has sanctioned an individual for attempting to facilitate arms deals between Russia and the Democratic People’s Republic of Korea (DPRK). Sanctions and export controls imposed by a coalition of over 30 countries have constrained Russia’s ability to replace lost military equipment and supplies with modern technology.

OFAC designated a Slovakian national, Ashot Mkrtychev under the authority of Executive Order 13551 for having attempted to, directly or indirectly, import, export, or reexport to, into, or from the DPRK any arms or related materiel.

For identification information on Mkrtychev, see this BankersOnline OFAC Update.


Fed amends Regs A and D to reflect interest rate increases

The Federal Reserve Board has published in the Federal Register for March 29, 2023, amendments to Regulations A and D to adjust interest rates in accordance with actions announced on March 22.

  • At 88 FR 18379, an amendment to section 201.51 of Regulation A to increase the interest rate charged on primary credit provided by the Federal Reserve Banks to 5 percent and for secondary credit to 5.50 percent.
  • At 88 FR 18380, an amendment to section 204.10 to increase the interest on reserve balances rate ("IORB" rate) to 4.9 percent.

The amendments, which have been posted to the BankersOnline Regulations pages, are effective on publication, with applicability from March 23, 2023.


Syrian and Lebanese actors sanctioned

The Treasury Department on Tuesday announced that OFAC has taken action in coordination with counterparts in the United Kingdom to designate key individuals supporting the regime of Syrian President Bashar al-Assad and the production or export of Captagon, a dangerous amphetamine. These designations, some of which are being implemented pursuant to the Caesar Syrian Civilian Protection Act of 2019 also highlight the important role of Lebanese drug traffickers — some of whom maintain ties to Hizballah — in facilitating the export of Captagon. OFAC's action also underscores the al-Assad family dominance of illicit Captagon trafficking and its funding for the oppressive Syrian regime.

As a result of Tuesday’s action, all property and interests in property of these persons that are in or come within the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. OFAC regulations generally prohibit all dealings by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of designated or otherwise blocked persons.

For the names and identification information of the designated parties, see this BankersOnline OFAC Update.


Fed Vice Chair Barr to testify before Senate committee

The Federal Reserve Board has released scripted testimony on the Federal Reserve's supervisory and regulatory oversight of Silicon Valley Bank (SVB) by Vice Chair for Supervision Michael S. Barr before the Senate Committee on Banking, Housing, and Urban Affairs at a hearing scheduled for 10:00 a.m. this morning.

Barr's remarks state that SVB failed because the bank's management did not effectively manage its interest rate and liquidity risk, and the bank then suffered a devastating and unexpected run by its uninsured depositors in a period of less than 24 hours. Barr will detail the SVB management decisions leading up to the failure, the speed at which news of the bank's liquidity problems surged through social media, and the panic of the bank's depositors.

Barr's remarks also relate the response by the FDIC, Federal Reserve, and Treasury as they addressed concerns that SVB's collapse and that of Signature Bank's closing could trigger questions about the overall safety and soundness of the U.S. commercial banks. Barr will also relate the Federal Reserve Board's review of the circumstances leading up to SVB's failure. The California Department of Financial Protection and Innovation is also conducting a review of its oversight and regulation of SVB. The Federal Reserve is looking at SVB's growth and management, the Fed's supervisory engagement with the bank, and the regulatory requirements that applied to the bank.


FDIC releases Gruenberg testimony in advance

The FDIC has released testimony of Chairman Martin J. Gruenberg scheduled for today before the Senate Committee on Banking, Housing, and Urban Affairs.

Chairman Gruenberg's remarks review in detail the events surrounding the March 10, 2023, closing of Silicon Valley Bank (SVB), Santa Clara, California, the announcement on March 8 by Silvergate Bank that it would wind down operations and voluntarily liquidate, and the March 12 closure of Signature Bank, New York, New York. The Boards of the FDIC and Federal Reserve voted to recommend, and the Treasury Secretary, in consultation with the President, determined that the FDIC could use emergency system risk authorities under the Federal Deposit Insurance (FDI) Act to full protect all depositors in winding down SVB and Signature Bank. Both institutions were allowed to fail — shareholders lost their investment, unsecured creditors sustained losses, the directors and senior executives of both banks were removed. Any losses to the Deposit Insurance Fund as a result of uninsured deposit coverage at those banks will be repaid by a special assessment on banks as the law requires, taking into consideration the types of entities that benefit from any action taken or assistance provided.

The Chairman's remarks also describe the events leading up to the failure of SVB and Signature Bank and the facts and circumstances that prompted the decision to utilize the authority in the FDI Act to protect all depositors in those banks following these failures. They also discuss the FDIC’s assessment of the current state of the U.S. financial system, which remains sound despite recent events, and include some preliminary lessons learned as we look back on the immediate aftermath of this episode.

Chairman Gruenberg's remarks will also announce the FDIC will undertake a comprehensive review of the deposit insurance system and will release a report by May 1, 2023, that will include policy options for consideration related to deposit insurance coverage levels, excess deposit insurance, and the implications for risk-based pricing and deposit insurance fund adequacy. In addition, the FDIC’s Chief Risk Officer will undertake a review of the FDIC’s supervision of Signature Bank and will also release a report by May 1, 2023. Further, the FDIC will issue in May 2023 a proposed rulemaking for the special assessment for public comment.


FDIC demands Utoppia Inc. stop its misleading deposit insurance statements

Yesterday, the FDIC issued a letter demanding that Utoppia Inc. and certain of its officers stop making false and misleading statements about FDIC deposit insurance and take immediate corrective action to address these false or misleading statements.

Based upon evidence collected by the FDIC, Utoppia and/or its officers made false representations in English and in Spanish, stating or suggesting that Utoppia is FDIC-insured and that FDIC insurance will protect customers’ cryptocurrency, and did not clearly and conspicuously identify an insured deposit institution for placement of deposits. These representations and material omissions are false and misleading.

The Federal Deposit Insurance Act (FDI Act) prohibits any person from representing or implying that an uninsured product is FDIC-insured or from knowingly misrepresenting the extent and manner of deposit insurance. The FDI Act further prohibits companies from implying that their products are FDIC-insured by using “FDIC” in the company’s name, advertisements, or other documents. The FDIC is authorized by the FDI Act to enforce this prohibition against any person.


First-Citizens assumes last of SV Bridge Bank deposits and loans

On Sunday, the FDIC announced it had entered into a purchase and assumption agreement for all deposits and loans of Silicon Valley Bridge Bank, National Association, with First-Citizens Bank & Trust Company, Raleigh, North Carolina.

The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First-Citizens Bank & Trust Company on Monday, March 27, 2023. Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First-Citizens Bank & Trust Company that systems conversions have been completed to allow full-service banking at all of its other branch locations.

Depositors of Silicon Valley Bridge Bank, National Association, will automatically become depositors of First-Citizens Bank & Trust Company. All deposits assumed by First-Citizens Bank & Trust Company will continue to be insured by the FDIC up to the insurance limit.

Sunday's transaction included the purchase of about $72 billion of Silicon Valley Bridge Bank, National Association's assets at a discount of $16.5 billion. Approximately $90 billion in securities and other assets will remain in the receivership for disposition by the FDIC. In addition, the FDIC received equity appreciation rights in First Citizens BancShares, Inc., Raleigh, North Carolina, common stock with a potential value of up to $500 million.

The FDIC and First-Citizens Bank & Trust Company entered into a loss-share transaction on the commercial loans it purchased of the former Silicon Valley Bridge Bank, National Association. The FDIC as receiver and First-Citizens Bank & Trust Company will share in the losses and potential recoveries on the loans covered by the loss-share agreement. The loss-share transaction is projected to maximize recoveries on the assets by keeping them in the private sector. The transaction is also expected to minimize disruptions for loan customers. In addition, First-Citizens Bank & Trust Company will assume all loan-related Qualified Financial Contracts.

The FDIC now estimates the cost of the failure of Silicon Valley Bank to its Deposit Insurance Fund (DIF) to be approximately $20 billion. The exact cost will be determined when the FDIC terminates the receivership.


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