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Senior Deputy Comptroller for Bank Supervision Policy Grovetta N. Gardineer yesterday discussed efforts to protect the financial system from being misused for illegal purposes during a hearing before the U.S. Senate Committee on Banking, Housing, and Urban Affairs. Gardineer specifically addressed the threats posed to our financial system by the use of shell companies and methods to better identify the true beneficial owners of assets.

• Oral presentation
• Written testimony

The Federal Reserve Board has issued a consent order of prohibition and order to cease and desist to a former Fremont, Ohio, bank branch manager who, according to the order, embezzled approximately $266,039 in cash from bank tellers' drawers between 2009 and June 2018. Under the order, she and another party must fully comply with a payment agreement with the bank requiring reimbursement of the misappropriated funds in monthly installments.

The OCC has posted its Semiannual Risk Perspective for Spring 2019. Highlights include:

• Credit quality is strong when measured by traditional performance metrics, but successive years of growth, incremental easing in underwriting, risk layering, and building credit concentrations result in accumulated risk in loan portfolios.
• Operational risk is elevated as banks adapt to a changing and increasingly complex operating environment. Key drivers for operational risk include persistent cybersecurity threats as well as innovation in financial products and services, and increasing use of third parties to provide and support operations that are not effectively understood, implemented, and controlled.
• Compliance risk related to Bank Secrecy Act/Anti-Money Laundering (BSA/AML) is high as banks remain challenged to effectively manage money laundering risks.
• Interest rate risk and the related liquidity risk implications pose potential challenges to earnings given the uncertain rate environment, competitive pressures, changes in technology, and untested depositor behavior.

OFAC has designated a Mexican magistrate judge and a former Mexican governor for their involvement in corruption activities. OFAC designated Mexican magistrate judge Isidro Avelar Gutierrez under the Foreign Narcotics Kingpin Designation Act (Kingpin Act) because of his actions on behalf of the Cartel de Jalisco Nueva Generacion (CJNG) and the Los Cuinis Drug Trafficking Organization (Los Cuinis), two closely allied narcotics trafficking organizations designated pursuant to the Kingpin Act in 2015. Avelar Gutierrez received bribes from these narcotics trafficking organizations in exchange for providing favorable judicial rulings to their senior members. OFAC also designated Roberto Sandoval Castaneda, the former governor of the Mexican state of Nayarit, pursuant to Executive Order (E.O.) 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act and targets perpetrators of serious human rights abuse and corruption.

OFAC also designated today under E.O. 13818 three of Sandoval Castaneda’s complicit family members who have acted or purported to act on his behalf by holding his ill-gotten assets in their names. Four Mexican entities were also designated today for being owned or controlled by Sandoval or a designated family member.

For information on these and other individuals and entities designated on May 17, see BankersOnline's OFAC Update.

• Kingpin Act Chart of CJNG and Los Cuinis DTOs<
• E.O. Chart on entities and individuals designated
  

The OCC has released a list of enforcement actions taken in March, April and May against OCC-supervised institutions and individuals affiliated with them.

• A Cease and Desist Order was issued against the former President, CEO, Director, and Loan Officer of First National Bank of Woodsboro, Woodsboro, Texas, found to have received a personal loan from a bank customer while he was the loan officer for that customer, without disclosing the loan to the bank's directors.
• Flood insurance-related Civil Money Penalty Orders against MidFirst Bank, Oklahoma City, Oklahoma, and Colonial Savings, F.A., Fort Worth, Texas.
• A personal Cease and Desist and Prohibition order was issued to a former officer of Northwestern Bank, N.A., Dilworth, Minnesota, related to certain nominee loans by the bank from which he or companies associated with him received significant proceeds without his being identified as a borrower.
• A Removal/Prohibition Order was filed against a former teller of Bank of America, N.A. Charlotte, NC. who misappropriated $49,172 from his cash box.

Yesterday, OFAC designated five individuals and one entity under the Sergei Magnitsky Rule of Law Accountability Act of 2012 (the Magnitsky Act). In addition, the U.S. Department of State issued its annual submission to Congress on the U.S. Government’s actions to implement the Magnitsky Act.

Any property or interests in property of those designated within or that come within U.S. jurisdiction are blocked, and transactions by U.S. persons involving the designated persons are generally prohibited. Yesterday’s action brings the total number of individuals or entities designated by OFAC pursuant to the Magnitsky Act to 55. For identity information on yesterday's designees, see BankersOnline's OFAC Update.

• Treasury Department press release

In two settlement decisions, the European Commission has fined five banks for taking part in two cartels in the Spot Foreign Exchange market for 11 currencies—Euro; British Pound; Japanese Yen; Swiss Franc; U.S., Canadian, New Zealand and Australian Dollars; and Danish, Swedish and Norwegian crowns. The first decision (so-called “Forex - Three Way Banana Split” cartel) imposes a total fine of €811,197,000 ($908.5 million) on Barclays, The Royal Bank of Scotland (RBS), Citigroup and JPMorgan. The second decision (so-called “Forex- Essex Express” cartel) imposes a total fine of €257,682,000 ($288.6 million) on Barclays, RBS and MUFG Bank (formerly Bank of Tokyo-Mitsubishi). UBS is an addressee of both decisions, but was not fined as it revealed the existence of the cartels to the Commission.

• European Commission press release

On Wednesday, FinCEN announced it is reissuing its real estate Geographic Targeting Orders (GTOs) for 12 metro areas. The GTOs require U.S. title insurance companies to identify the natural persons behind shell companies used in all-cash purchases of residential real estate. The purchase amount threshold remains $300,000 for each covered metropolitan area. The orders provide FinCEN valuable data on the purchase of residential real estate by persons possibly involved in various illicit enterprises. Reissuing the GTOs will further assist in tracking illicit funds and other criminal or illicit activity, as well as inform FinCEN’s future regulatory efforts in this sector.

The GTOs cover certain counties within the following major U.S. metropolitan areas: Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle. They are effective beginning May 16, 2019, and ending November 11, 2019, but can be renewed.

FinCEN also posted an FAQ about the GTOs, which don't directly affect banks..

The Financial Action Task Force has posted its May Business Bulletin, with a brief update on recent FATF outcomes of interest to the private sector.

The 2019 Private Sector Consultative Forum was held May 6–7 at the United Nations Office on Drugs and Crime Headquarters in Vienna. The meeting was chaired by FATF President Marshall Billingslea from the United States. Over 300 private sector representatives, including from the financial sector, civil society, and FATF members and observers, participated in this year’s Private Sector Consultative Forum. Over the two days of the Forum, participants held constructive discussions on the issues of the importance of AML/CFT in the context of combating corruption, and latest trends/priorities of AML/CFT in the public and private sectors.

The Federal Reserve Board has posted its May 2019 Supervision and Regulation Report, which summarizes banking conditions and the Federal Reserve’s supervisory and regulatory activities. The report demonstrates the continued health and soundness of the banking industry. Figures in the report show that industry profitability ratios remain high, driven in part by the industry’s net interest margin reaching a six-year high.

The report also outlined 2019 supervisory priorities for firms in different Fed supervisory portfolios. Regional and community banks will see the Fed focus on credit concentrations in CRE and construction, cybersecurity and AML/BSA compliance. Regional banks will also see a focus on underwriting practices, M&A risks and internal audit. Community banks will experience Fed emphasis on ag lending and liquidity risk.