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03/06/2020

OFAC sanctions Nicaraguan National Police and commissioners

Treasury has announced that OFAC has designated the Nicaraguan National Police (NNP), the primary law enforcement entity in Nicaragua, for its role in serious human rights abuse in Nicaragua. Additionally, OFAC designated three NNP commissioners, Juan Antonio Valle Valle, Luis Alberto Perez Olivas, and Justo Pastor Urbina, for their involvement as senior officials of the Government of Nicaragua and leaders of the NNP. OFAC’s designation is directed at the NNP as an institution responsible for human rights abuses in Nicaragua.

For identification information, see BankersOnline's OFAC Update.

03/06/2020

OCC adds FAQs on third-party relationships

OCC Bulletin 2020-10, issued yesterday, contains updated FAQs to supplement OCC Bulletin 2013-29, “Third-Party Relationships: Risk Management Guidance,” issued October 30, 2013. These FAQs are intended to clarify the OCC’s existing guidance and reflect evolving industry trends.

The new bulletin rescinds OCC Bulletin 2017-21, “Third-Party Relationships: Frequently Asked Questions to Supplement OCC Bulletin 2013-29,” issued on June 7, 2017. The FAQs from Bulletin 2017-21 have been incorporated unchanged into the new bulletin, except for question No. 24, which was updated to reflect current AICPA Service Organization Control report information.

Topics addressed include:

  • the terms “third-party relationship” and “business arrangement.”
  • when cloud computing providers are in a third-party relationship with a bank.
  • when data aggregators are in a third-party relationship with a bank.
  • risk management when the bank has limited negotiating power in contractual arrangements.
  • critical activities and how a bank can determine the risks associated with third-party relationships.
  • bank management’s responsibilities regarding a third party’s subcontractors.
  • reliance on and use of third party-provided reports, certificates of compliance, and independent audits.
  • risk management when third party has limited ability to provide the same level of due diligence-related information as larger or more established third parties.
  • risk management when using a third-party model or when using a third party to assist with model risk management.
  • use of third-party assessment services in managing third-party relationship risks.
  • a board’s approval of contracts.
  • risk management when obtaining alternative data from a third party

03/05/2020

FinCEN fines former U.S. Bank official

FinCEN has announced it has assessed a $450,000 civil money penalty against Michael LaFontaine, former Chief Operational Risk Officer at U.S. Bank National Association (U.S. Bank), for his failure to prevent violations of the Bank Secrecy Act during his tenure (January 2005 to June 2014). U.S. Bank used automated transaction monitoring software to spot potentially suspicious activity, but it improperly capped the number of alerts generated, limiting the ability of law enforcement to target criminal activity. In addition, the bank failed to staff the BSA compliance function with enough people to review even the reduced number of alerts enabling criminals to escape detection.

U.S. Bank failed to timely file thousands of Suspicious Activity Reports (“SARs”). Bank employees understood through internal testing and other means that the inadequate AML policies described above caused the Bank to fail to identify and report large numbers of suspicious transactions. Subsequent analysis of the Bank’s transactions has revealed that it failed to timely file thousands of SARs, including on transactions that potentially laundered the proceeds from crimes. The Bank was assessed a civil money penalty of $185 million in February 2018 for these inadequacies and violations.

03/03/2020

Individuals laundering cryptocurrency sanctioned

Treasury has reported OFAC has sanctioned two Chinese nationals involved in laundering stolen cryptocurrency from a 2018 cyber intrusion against a cryptocurrency exchange. This cyber intrusion is linked to Lazarus Group, a U.S.-designated North Korean state-sponsored malicious cyber group. Seven unrelated deletions to the SDN List were also posted. For identification information, see BankersOnline's OFAC Update.

03/03/2020

Cryptocurrency working session convened

Treasury yesterday convened a meeting of industry thought leaders and compliance experts to discuss supervisory and regulatory challenges facing digital assets, including cryptocurrency. Treasury is focused on preventing the misuse of virtual currencies by money launderers, terrorist financiers, and other bad actors.

03/03/2020

Amendments to GLB Safeguards Rule proposed

The Federal Trade Commission has announced it will hold a public workshop on May 13, 2020, seeking research, testimony, and other input on proposed changes to the Safeguards Rule under the Gramm-Leach-Bliley Act (GLB). The workshop will explore some of the issues raised in response to amendments the Commission has proposed making to the Safeguards Rule, which requires financial institutions to develop, implement, and maintain a comprehensive information security program. The workshop is seeking information, empirical data, and testimony on such topics as:

  • price models for specific elements of information security programs;
  • standards for security in various industries;
  • the availability of third party information security services aimed at different sized institutions;
  • information about penetration and vulnerability testing; and
  • the costs of and possible alternatives to encryption and multifactor authentication.

03/02/2020

FDIC releases January enforcement orders

The FDIC has released a list of enforcement actions the agency took in January. A civil money penalty of $16,750 was assessed on a Montana Bank for a pattern or practice of flood insurance-related violations. Cease and desist orders were issued by consent to banks in Glendale, California, and Holmen, Wisconsin.

Removal/Prohibition orders were issued to:

  • a former banking center manager at Yosemite Bank, a division of Premier Valley Bank, Fresno, California, after a finding that he took funds payable to the bank and converted them for his personal benefit
  • the former CEO and Chairman of Citizens State Bank, Woodville, Texas, after a finding that he sought and obtained reimbursement from the bank for personal and family expenses and obtaining reimbursement for other expenses without proper documentation
  • a former teller at FNBC Bank & Trust, LaGrange, Illinois, after a finding that she misappropriated over $138,000 from a bank customer's deposits for personal gain or other benefit without reimbursing the customer or the bank

03/02/2020

NCUA bans 11 from industry

The NCUA has announced that it issued nine prohibition notices and two prohibition orders in February against former employees of—

  • Louisville Metro Police Officers Credit Union, Louisville, Kentucky, who had been sentenced on charges of financial institution fraud and aggravated identity theft
  • MyPoint Credit Union, San Diego, California, who had been sentenced on the charge of bank fraud
  • Notre Dame Federal Credit Union, Notre Dame, Indiana, who had been sentenced on the charge of misapplication of monies by a federal credit union employee
  • AOD Federal Credit Union, Oxford, Alabama, who had been sentenced on the charge of embezzlement by a credit union employee
  • Notre Dame Federal Credit Union, Notre Dame, Indiana, who had been sentenced on the charge of theft
  • Advia Credit Union, Parchment, Michigan, was sentenced on the charge of embezzlement (two individuals)
  • Singing River Federal Credit Union, Moss Point, Mississippi, who had been sentenced on the charge of embezzlement
  • Lakeside Federal Credit Union, Hammond, Indiana, for unstated claims by the NCUA
  • EM Federal Credit Union, Mesa, Arizona, for unstated claims by the NCUA
  • Winthrop-University Hospital Employees Federal Credit Union, Mineola, New York, who had been sentenced on the charge of embezzlement

02/27/2020

Recap of FTC Small Business Financing Forum

The Federal Trade Commission has posted a new paper that provides a look at the information covered in the FTC’s Strictly Business forum on small business financing. The paper outlines a number of topics discussed by participants in the forum. It provides an overview of small business lending and the emergence of new online options available to businesses seeking financing. The paper covers both potential benefits and consumer protection concerns around these online lending options for businesses, and explores in detail consumer protection issues associated with merchant cash advances.

The Commission has also created a direct complaint link for small businesses to submit lending- or financing-related complaints. The agency encourages small business owners to submit complaints if they have experienced potentially unlawful conduct.

02/27/2020

OFAC posts two new FAQs on reporting procedures

OFAC has posted a notice it has published two new FAQs related to the June 21, 2019, amendment to OFAC's Reporting, Procedures and Penalties Regulations (31 CFR part 501).

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