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FinCEN has published a notice [83 FR 67487] inviting the public to nominate financial institutions, trade groups, and non-federal regulators or law enforcement agencies for membership on the Bank Secrecy Act Advisory Group. New members will be selected for three-year membership terms. The BSAAG is the means by which the Treasury receives advice on the operations of the Bank Secrecy Act. As chair of the BSAAG, the Director of FinCEN is responsible for ensuring that relevant issues are placed before the BSAAG for review, analysis, and discussion. Nominations must be received by January 28, 2018.

Federal banking regulators -- the CFPB, FDIC, Fed, OCC and NCUA -- remain open during the partial shutdown of the federal government because their funding is independent of congressional budgeting. Reports indicate that the SBA, FHA and many other agencies aren't open for business. The SEC and CFTC have shut down all but essential market-support functions.

FinCEN continues to process AML filings, so banks should not suspend their filings of SARs and CTRs. And the Postal Service is not affected by the hiatus in federal payments.

And while Congress and the president remain deadlocked over funding government programs over the next few -- or several -- days, banks are already seeing the effects of the shutdown, as federal employees and contractors who won't be paid during the shutdown begin to ask for accommodations such as waived fees.

The Fed has issued a payments study supplement that indicates card payments increased 10.1 percent by number and 8.4 percent by value from 2016 to 2017, each larger than the increases of 7.8 percent by number and 6.3 percent by value from 2015 to 2016. Remote payments claimed a greater share of total general-purpose card transactions over the 2016 to 2017 period, and the number of in-person chip-authenticated card payments also posted substantial gains. Check payments and automated teller machine (ATM) withdrawals declined by number yet increased in value.

The FDIC has announced two actions related to brokered deposits:

• adoption of a final rule related to the treatment of reciprocal deposits
• issuance of an advance notice of proposed rulemaking related to brokered deposits and interest rate restrictions

The final rule implements Section 202 of the Economic Growth, Regulatory Relief, and Consumer Protection Act to exempt certain reciprocal deposits from being considered as brokered deposits for certain insured institutions. The final rule also makes conforming amendments to the FDIC's regulations governing deposit insurance assessments. In the ANPR, the FDIC seeks comments on all aspects of the brokered deposit and interest rate regulations. The ANPR is part of the FDIC's effort to comprehensively review its regulations and policies.

FIL-87-2018 was also issued regarding the final rule and the ANPR.

UPDATE: The ANPR was published at 84 FR 2366 on February 6, 2019, with a comment deadline of May 7, 2019.

OFAC has announced the designation of a former officer of Russia’s Main Intelligence Directorate (GRU) for having acted on behalf of sanctioned oligarch Oleg Deripaska. OFAC also issued new designations related to the Internet Research Agency (IRA), an entity previously sanctioned for its efforts to interfere in U.S. elections. The action also includes the designation of 15 members of the GRU, a previously designated Russian military intelligence organization, for their involvement in a wide range of malign activity, including attempting to interfere in the 2016 U.S. election, efforts to undermine international organizations through cyber-enabled means, and an assassination in the United Kingdom. Identification information can be found in our OFAC Update.

The FDIC, FRB, OCC, SEC, and the U.S. Commodity Futures Trading Commission have issued a notice of proposed rulemaking to amend regulations implementing Section 13 of the Bank Holding Company Act (the Volcker Rule) in a manner consistent with the statutory amendments made pursuant to Sections 203 and 204 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). These statutory amendments modified the Volcker Rule to exclude certain community banks from the Volcker Rule and to permit banking entities subject to the Volcker Rule to share a name with a hedge fund or private equity fund that it organizes and offers under certain circumstances. The FDIC issued FIL-86-2018 regarding the proposal.

The OCC and the FDIC have issued notices of proposed rulemaking to amend the stress testing rule consistent with requirements imposed by section 401 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The proposed rule, which has been published in the Federal Register, would revise the minimum threshold for national banks and federal savings associations to conduct stress tests from $10 billion to $250 billion, revise the frequency by which certain national banks and federal savings associations would be required to conduct stress tests, reduce the number of required stress testing scenarios from three to two, and make certain additional facilitating and conforming changes to the stress testing requirements. Comments will be accepted through February 19, 2019.

• OCC Notice
• FDIC notice

UPDATE: Due to the December - January partial government shutdown, the OCC's proposal was not published until February 12, 2019 (at 84 FR 3345). Comments are due by March 14, 2019.

The Financial Crimes Enforcement Network (FinCEN) announced Monday that it has assessed a $14.5 million civil money penalty on UBS Financial Services, Inc., of which $5 million will be paid to the U.S. Treasury, and the balance will be concurrent with $9.5 million of the $10 million in penalties imposed for similar or related conduct by the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

FinCEN said UBSFS failed to develop and implement an appropriate, risk-based anti-money laundering program that adequately addressed the risks associated with accounts that included both traditional brokerage and banking-like services. UBSFS failed to implement appropriate policies and procedures to ensure the detection and reporting of suspicious activity through all accounts—particularly for those accounts that exhibited little to no securities trading. The firm did not adequately structure its AML program to address the use of securities accounts for the purpose of moving funds rather than trading securities.

FinCEN also said that, over several years, UBSFS processed through certain of its brokerage accounts hundreds of transactions that exhibited red flags associated with shell company activity. UBSFS failed to adequately monitor foreign currency-denominated wire transfers—amounting to tens of billions of dollars—that were conducted through its commodities accounts and retail brokerage accounts. UBSFS’s AML monitoring system failed to capture critical information about these foreign currency-denominated wires, including sender and recipient information and the country of origin and destination. As a result, it was unable to identify and investigate potentially suspicious transactions based on the presence of important risk factors, such as jurisdiction and the involvement of politically exposed persons.

For additional information, see our Penalty Page entry.

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency have published [83 FR 64660] a proposal that would implement a new approach for calculating the exposure amount of derivative contracts under the agencies' regulatory capital rule. The proposed approach, called the standardized approach for counterparty credit risk (SA-CCR), would replace the current exposure methodology (CEM) as an additional methodology for calculating advanced approaches total risk-weighted assets under the capital rule. Comments are due by February 15, 2019.

The Financial Action Task Force (FATF) has released its December 2018 Business Bulletin with a brief update to the private sector on recent FATF outcomes of interest to the private sector, including updates from the FATF 4th Round of Mutual Evaluations.